Document Fraud is Costing Insurers Billions – Heres How to Fight Back

The insurance industry faces a persistent challenge: fraud. Document forgery, in particular, is among the most significant threats in the sector. 

This blog explores strategies to reduce document fraud across the insurance industry, including life, medical, and general insurance. We’ll examine the challenges, quantify the impact, and highlight innovative solutions, including Fortiro, shaping a more protected future for insurers and policyholders.

The Threat of Document Fraud in Insurance

Document fraud in insurance relates to falsifying or altering documents to obtain undeserved benefits. Examples of document fraud include forged death certificates in life insurance claims, fabricated medical bills in health insurance, and inflated repair estimates in property insurance. The consequences are substantial, impacting insurers and policyholders through increased premiums and eroded trust.

Types of Insurance Affected by Document Fraud

Life Insurance 

Fraudulent activities in life insurance often involve forged death certificates, falsified income documents, impersonating beneficiaries, or misrepresenting the policyholder’s health status on application forms. For example, someone might falsely claim a policyholder’s death to receive a payout.

Medical/Health Insurance

Document fraud in the medical and health insurance sector can take several forms, including fabricated medical bills, which involve overcharging or billing for services never provided; forged prescriptions, where drugs are obtained illegally for resale or personal use; and identity theft, which consists in using another person’s insurance information to receive treatment.  

General Insurance (Automotive, Property, etc) 

Across general insurance, document fraud can manifest in many situations, such as staged or fabricated accidents to collect insurance payouts for vehicle damage or injury, inflating repair estimates on property or vehicles, and falsifying proof of ownership to claim insurance on stolen or non-existent property.    

Financial Losses and Impact

The financial impact of insurance fraud is significant.

The Coalition Against Insurance Fraud estimates fraud costs more than $300 billion annually in the United States.

In Australia, the Insurance Council of Australia reported that its members identified $560 million in opportunistic insurance fraud related to motor and property claims alone. 

Looking at the bigger picture, the Insurance Fraud Bureau of Australia (IFB) estimates that fraud costs Australian insurers an estimated $2.2 billion annually.

Document fraud reduces insurers’ profits and limits their ability to invest in innovation. Ultimately, the costs associated with document fraud flow through the entire insurance ecosystem, impacting both insurers and policyholders through higher premiums.

Challenges in Detecting Document Fraud

Detecting document fraud is challenging due to several factors. Advances in technology have enabled document forgeries to become highly sophisticated, convincing and challenging to detect. 

Furthermore, the sheer volume of paperwork insurers process creates multiple challenges. Thorough document verification is time-consuming, creating operational bottlenecks that impact customer satisfaction and compliance. It also requires specialised expertise that can be difficult to recruit at scale. The combination of factors makes comprehensive fraud detection a constant struggle.

Another challenge is the lack of standardised verification processes. Inconsistent verification processes across different insurers and jurisdictions can create loopholes that fraudsters exploit. 

Fraud tactics are constantly evolving, requiring insurers to adapt their detection methods continually. 

Fortiro: Solving Document Fraud Prevention 

Combating document fraud requires advanced solutions capable of identifying increasingly sophisticated schemes. Fortiro Protect was purpose-built with such capabilities, utilising a constantly growing repository of countless document fraud indicators based on millions of document reviews. 

Fortiro helps insurers detect and prevent fraud by reviewing documents in multiple ways. Its rule engine examines each document to identify suspicious patterns, making it easier to catch fraud before it becomes a problem.

A Multi-Layered Rule Engine

Fortiro’s fraud detection leverages a hybrid approach, combining the power of artificial intelligence (AI) with the reliability of traditional rule-based systems. The hybrid approach captures specific fraud indicators unique to each document format and applies it to various document formats, such as PDFs or image files, and document types, such as invoices, receipts, income documents, and claim photos.

Fortiro’s AI detects hidden patterns and subtle fraud clues, while its more traditional rules catch obvious inconsistencies when reviewing the documents’ content, such as figures not adding up correctly. The result is comprehensive protection, regardless of how fraudulent information is presented.

Examples of Fraud Detection in Action

Fortiro helps insurers fight fraud across several use cases, including the following:

• Preventing Fraudulent Life Insurance Claims: Fortiro will check death certificates for signs of fraud, including cross-checks against third-party databases and official government records. This automated validation process confirms the authenticity of a document, which is critical for insurers when deciding on significant payouts for life insurance claims. Preventing even a single false death claim can protect insurers from substantial losses.
• Uncovering Staged Accidents and Inflated Claims: Claimants can use photos from the internet to support fraudulent or inflated claims, such as staged accidents. Fortiro will automatically check supporting photographs and perform a reverse image search of online sources to identify such cases, providing insurers with actionable evidence to investigate the fraud.
• Detecting Forged or Altered Insurance Documents and Evidence: Fortiro’s advanced fraud detection rules are designed to identify manipulated insurance documents, including medical bills, and across formats like PDFs and images. By analysing metadata, pixel information, font inconsistencies, and a wide range of other indicators, Fortiro empowers insurers to detect even the most sophisticated document tampering attempts.

Fraud Detection in Real-Time

Fortiro’s rule engine operates in real-time, automating document verification and enabling insurers to identify potentially fraudulent submissions quickly. As a result, the manual workload associated with document reviews is significantly reduced, and the overall claims process is faster, accelerating legitimate claim settlements while reducing the risk of payouts for fraudulent claims.

Fortiro provides several benefits, including:

• Faster Claims and Outcomes: Fortiro contributes to faster turnaround times for legitimate claims by accelerating the initial stages of claims processing, resulting in an improved customer experience. 
• Significant Cost Savings: Fortiro helps insurers avoid substantial financial losses by detecting and preventing fraudulent claims. Reduced manual reviews also contribute to operational cost reductions.
• Stronger Compliance Measures: Fortiro supports insurers in strengthening their fraud detection processes, helping them align with industry best practices and regulatory expectations. Fortiro can help insurers reduce exposure to legal and financial risks associated with inadequate fraud prevention.

Conclusion

Document fraud is a significant threat to the insurance industry, impacting all segments, from life and medical insurance to general property and accident insurance. 

However, there now exists a powerful defence against document fraud. By implementing automated document verification through Fortiro, insurers can detect and stop fraud in real-time, saving millions in payouts each year while maintaining efficient claims processing. 

Fortiro’s technology provides comprehensive protection while relieving operational bottlenecks and delighting customers with faster claims processing. These benefits are all available today, and any insurer can be protected. 

See Fortiro In Action

To see how Hannover Life Re of Australasia uses Fortiro, click here or on the image below.