NCIB Reports 27% Increase in Questionable Claims

Insurers are responding to increased fraud activity with more anti-fraud technology budget, aimed at detecting potentially fraud as early as possible in the claims lifecycle.

The National Insurance Crime Bureau (NICB) reported a 27% increase in questionable claims (QCs) in the period from January 1, 2010 to December 31, 2012. California took first place in raw numbers (58,415), followed by Florida (29,086), Texas (27,107), New York (23,402) and Maryland (10,315). The NCIB reported a 16% increase from 2011 to 2012.

The insurance industry continues to face increases in reported fraud, but it’s not clear whether the figures are attributable more to a greater focus on fraud risk on the part of insurers or an increased frequency of fraudulent claims, according to James Ruotolo, principal in SAS’s Insurance Fraud Solutions.

“Casualty-related frauds continue to drive much of the increase, suggesting that medical fraud continues to plague the P&C industry,” Ruotolo notes. “Thankfully, many insurers see the risk in allowing fraud to continue unchecked and are making plans to address it.”

[For more of James Ruotolo's insights on the use of technology to fight fraud, see Big Data for Fraud Detection.]

A recent study by the Coalition Against Insurance Fraud found that 30% of carriers have increased funding for fraud detection technology, Ruotolo adds.

Aite Group senior analyst, Property & Casualty insurance, Stephen Applebaum, commenting in his April 2013 report, The Escalating War on Insurance Fraud: P&C Carriers and Fraudsters Up Their Games, writes that, “Insurance fraud impacts not only every insurance company but virtually every consumer and taxpayer worldwide, and it shows no sign of easing. Aite Group estimates that claims fraud in the U.S. P&C industry alone cost carriers US$64 billion in 2012 and will reach US$80 billion by 2015.”

P&C carriers are beginning to focus their fraud management strategies and investments on solutions that enable fraud detection as early in the claims process as possible — before claims payments are made and valuable investigative opportunities are lost, Applebaum reports in an exchange with I&T.

“As the industry attempts to keep pace with fraudsters' varied, ever-shifting tactics, it must deploy more innovative, effective anti-fraud technologies or risk dire losses,” Applebaum comments. “P&C carriers should revisit and update their enterprise fraud strategies and actively review the many new and more effective solutions in the marketplace. Carriers that fail to improve their fraud-detection capabilities will find themselves both attacked by knowledgeable fraudsters and competitively disadvantaged.”

Top Five QC Cities

The following are the top five cities for questionable claims, according to the NBIC:

New York: 13,564

Los Angeles: 7,779

Miami: 5,503

Houston: 5,464

Baltimore: 3,690

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio