What is 'Fake Claims'

The term fake claims refers to insurance claims that are made fraudulently. These claims are made in an attempt for the policy holder to benefit financially from making claims that are false or exaggerated. While such practices are a fairly common occurrence, they are highly illegal.


Fake claims are often exaggerations of valid claims to an insurance policy. For example, a homeowner insurance policy holder may have been the victim of a breaking and entering where items were stolen. The number (and value) of the stolen items may be exaggerated on the claims report, indicating that more items were stolen than really were. This exaggeration could lead to the homeowner receiving a larger claim settlement than they are truly entitled. Large claims are often investigated to mitigate such problems.

How Insurance Companies Discover Fake Claims

Insurers try to find any patterns in the frequency and type of past claims. Insurance companies keep in-depth records on claims and do all sorts of analyses to interpret the data they contain – everything from figuring out who is most likely to file a claim to when and where. If a claim doesn't match the typical pattern, they'll notice. In addition, there are a number of indicators that insurance agents look for to identify possible instances of fake claims. They include:

  • Claimants who are totally calm and unstressed after submitting a large claim
  • Claimants who submit handwritten receipts for repairs on covered items
  • Claimants who add or increase homeowners or auto insurance coverage shortly before submitting a claim
  • A fire-damage claim for a home or auto where the fire started immediately after a family argument, or shortly after family members left the home/car
  • Medical claims submitted by a temporary employee, whose job is ending

In order to more easily identify instances of fake claims, many insurers employ Special Investigation Units, or SIUs, which consist of employees, who have backgrounds as detectives, police officers and similar professions. They can perform a wide array of tests and checks to identify anyone trying to commit fraud. Here are a few things they can do:

  • Conduct burn pattern analyses and computer simulations on cars and homes damaged by fire to determine if the fire was intentionally set or accidental.
  • Determine if a claimant's injuries match a reported accident.
  • Investigate damaged vehicles to see if the resulting dents and scratches are consistent with the accident report. Rust analysis and wear patterns can also be inspected to determine if damage is actually from an old accident.
  • Conduct financial reviews on claimants. Auto or homeowners claims from those who are behind on car or mortgage payments may be immediately flagged as potentially fraudulent.
  1. Claims Adjuster

    A claims adjuster investigates insurance claims to determine ...
  2. Adjuster

    An adjuster is an insurance claims agent charged with evaluating ...
  3. Continuing Claims

    Continuing claims refers to unemployed workers that qualify for ...
  4. Insurance Fraud

    Insurance fraud is executing illicit schemes to falsely reap ...
  5. Loss Cost

    Loss cost is the amount of money an insurer must pay to cover ...
  6. Aggregate Product Liability Limit ...

    Aggregate product liability limit is the maximum sum of money ...
Related Articles
  1. Insurance

    How Are Home Insurance Rates Determined?

    You home's value is one of the driving forces behind your home insurance premium and the amount of coverage you receive.
  2. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  3. Insurance

    Insurance Coverage: A Business Necessity

    Don't go to work without this policy in place - especially if your work is in your home.
  4. Insurance

    What Is and Isn't Covered by Homeowner's Insurance

    Understanding what your insurance covers can be confusing. Learn what almost all insurance policies have in common so you're prepared if disaster strikes.
  5. Tech

    How Big Data Has Changed Insurance

    No longer confined to technology, big data has become integral to providing solutions to the insurance industry's long standing challenges.
  6. Insurance

    How to Find the Right Car Insurance

    Finding the right car insurance can be difficult. However with these strategies, you can get the most for your money, protect your assets and your health.
  7. Insurance

    4 Frequently Asked Auto Insurance Questions

    Answers to four common questions about what and who is covered by an auto insurance policy.
  8. Insurance

    What Happens If You Lie on a Car Insurance Application

    The majority lies to save on premiums – but consequences can be severe for not owning up to things like tickets, accidents and how much you drive your car.
  9. Insurance

    Car Insurance Rates Too High? Check the Record

    Your driving history is clean as a whistle yet your premium has shot up. Here’s how to find out why – and what you can do about it.
  1. What is the main business model for insurance companies?

    Read about the most important components of an insurance company business model, such as risk pricing, investing and claims ... Read Answer >>
  2. How does the 80% rule for home insurance work, and how do capital improvements affect ...

    Learn what the 80% rule in homeowner's insurance is and what homeowners need to do so their insurance company covers the ... Read Answer >>
  3. Suppose my garage collapsed on my car. Are damages covered by my home insurance or ...

    Generally, damage to an automobile will be covered by comprehensive car insurance, which is in addition to collision coverage. Read Answer >>
  4. How Does the Insurance Sector Work?

    Learn more about the insurance sector, a historically safe place for equity investors and the home of some of the largest ... Read Answer >>
Trading Center