BY Alan Haskins | November 9, 2021
The vast majority of automobile and property claims are filed, adjusted, and paid in a timely manner –– just as intended. However, there is one factor that causes more disruption in the claims handling process than any other outside factor. That is third-party solicitation.
The (unnecessary) involvement of third parties in insurance claims is a growing trend –– one that can contribute to increased fraud losses by insurers and delays in claims payouts for consumers.
A third-party is a person or organization (an entity) that inserts itself into the claims handling process. This might be an individual that obtains accident information from a claim (such as victim details from a vehicle crash report) and solicits the victims for medical treatment or legal services. The third-party may even contend they can help process the claim on behalf of the victims for a fee.
Often, individuals claiming to be reputable contractors solicit victims immediately after a natural disaster (such as a hurricane, wildfire, flood, or tornado), coercing them into taking over the claims process for them. All the third-party needs are the claimant to sign over their rights to the claim.
The Costly Impact of Third-Party Interference
Most third-parties are responsible, legitimate service providers, but others are not. Fraudulent activity by third-party solicitation has become a major problem in several countries, especially in the United States. Some states have been hit particularly hard by this behavior, such as Florida.
The last five years have seen a significant increase in groups of lawyers, unlicensed claims adjusters, restoration companies, and others posing as “loss consultants” and “insurance specialists” targeting Florida homeowners who have suffered damage from hurricanes and other disasters. The scammers have ripped off thousands of people, offering rebates, deductible waivers, and gift cards to entice homeowners to sign over their insurance benefits.
This unlicensed activity has costly ramifications for homeowners. It drives up costs unexpectedly for insurers through fraud and litigation, often causing delays to claim payments or much-needed repairs of legitimate claims. Those costs are eventually passed on to the consumer in the form of increased premiums. Because of this behavior, insurance industry representatives said carriers are restricting their business and not offering new policies in affected areas.
How To Prevent Third-Party Insurance Fraud
While policyholders themselves are the first line of defense for vetting the trustworthiness of third-party service providers, insurers also have a significant interest in ensuring that third-parties are legitimate. The difficulty, however, is that in many cases insurance companies do not –– or cannot –– see the complete picture of a claim nor the claimants or third-parties. This is compounded when multiple claims occur in quick succession –– such as at the time of natural disasters –– and also involve multiple entities in the claims process. It can be daunting connecting the dots between claimants; individual entities; businesses; medical providers; contractors; attorneys; or public adjusters, as well as their addresses, contact details, payment details, linked directors and other associations.
Insurers often find themselves asking these sorts of questions: Is the lawyer involved in a claim also the owner of the medical clinic providing services to the claimants? Is the roofing company involved in a claim owned by the same people who have had previous fraud convictions in other states? Is the medical firm providing services to claimants associated with any persons who have been involved in other past fraudulent activity?
The solution? Insurers are pivoting to technology for a holistic view of their claims –– and the entities that may be driving up fraudulent claims volume.
Leveraging Technology to Sort Through the Clutter
Having a single and complete view of the claims picture can provide the information needed to help insurers make an intelligent decision to pay or deny a claim; identify suspected fraud; or develop an accurate picture of what occurred, who was involved, and what actions are required. It can also help identify greater insights into trends and claims prediction, as well as the likelihood of claims occurring fitting a certain profile.
Insurers can use entity resolution technology at scale to better organize and evaluate claims that involve third-parties. This is particularly beneficial in the aftermath of natural disasters where policyholders desperately need financial resources to recover from the damage done to their homes and other personal property. During these events, third-parties look to take advantage of the chaos and defraud both the insurers and policyholders. Utilizing technology that can create a full view of claims by connecting internal and external data is ideal for producing more accurate data profiling where traditional matching solutions typically struggle.
Identifying and linking third parties to applicants, current policy holders, claimants, and past claims increases the ability to pay valid claims quicker, identify potential red flags and prevent fraud. Insurers that are able to link entities through connections between all claims and all parties involved make more intelligent claims handling decisions on behalf of their policyholders.
Both policyholders and insurers have an important role to play in the prevention of third-party fraud. Consumers rarely have access to investigative tools beyond their best judgement and due diligence to vet the legitimacy of third-party service providers. Insurers have the time, expertise, and resources to invest in scalable technology solutions that will help them attain the full picture of who and what entities may be influencing the claim’s handling process –– which is key to making intelligent decisions and maintaining satisfied customers that are protected from fraudsters.
About the author: Alan Haskins is the North America Insurance Business Development Director for Quantexa. Haskins is an insurance industry leader with over 20 years of experience who spent time leading NICB’s Government Affairs team. He also served as the Anti-Fraud Coordinator with the NAIC.