What Are Fake Claims?

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

Understanding Fake Claims

Fake claims are often exaggerations of valid claims to an insurance policy. For example, a homeowner insurance policyholder 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 the 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.