🇺🇸United States

Missed and Late Identification of Fraudulent Claims Leading to Improper Paid Losses

4 verified sources

Definition

Because SIU referral criteria, data access, and triage are often weak, a significant share of fraudulent or abusive claims are never escalated to SIU or are identified only after payment. This results in recurring improper claim payments that are rarely or only partially recovered, representing pure revenue leakage for carriers.

Key Findings

  • Financial Impact: $20–$80 per policy per year in avoidable claim costs (industry estimates that ~10% of all claim costs are fraudulent and a material portion is missed or only identified post‑payment)
  • Frequency: Daily
  • Root Cause: Fragmented data, lack of up‑to‑date external data sources, and immature case‑triage processes mean many suspicious claims never reach SIU or are worked too late, after funds are disbursed and recovery likelihood drops sharply.[4][6] Carriers’ own SIU manuals emphasize the need for systematic detection and referral procedures precisely because missed referrals are a recurrent problem.[5][7]

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Insurance Carriers.

Affected Stakeholders

SIU investigators, Claims adjusters, Fraud analysts, Claims operations leadership, Actuarial pricing and reserving teams

Deep Analysis (Premium)

Financial Impact

$100,000–$300,000 per program cycle in unpaid/disputed improper losses due to inability to block payment at intake • $150,000–$400,000 per catastrophic event in undetected fraudulent payouts (10% fraud rate × mass claim volume) • $20-$50 per audited policy in unrecovered fraud signals; $250K-$750K annually for active audit book

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Current Workarounds

Account teams manage claim approval; SIU involvement only on high-value or suspicious claims; manual deep-dives by assigned SIU analyst; Excel-based loss history for account; ad-hoc meetings between account manager and SIU when questions arise • Administrator underwriter manually reviews application, emails flagging to sponsor SIU (if process exists), ad-hoc phone calls, approval delays waiting for sponsor feedback • Audit findings reported to MGA; carrier follows up via email; MGA may or may not remediate; carrier absorbs loss

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Inefficient SIU Investigations Driving Excess Labor and Vendor Spend

$100,000–$1,000,000+ per year in unnecessary investigation and vendor costs for a mid‑size carrier (inferred from industry emphasis on triage to improve SIU ROI)

Poor Investigation Quality Leading to Rework, Reopened Claims, and Adverse Outcomes

Low single‑digit percent of claim costs as avoidable leakage plus incremental defense and settlement costs on disputed SIU‑handled claims (industry‑wide, fraud and anti‑fraud failures cost billions annually)

Extended Claim Cycle Times Due to Manual and Data‑Constrained SIU Reviews

Tens of dollars per referred claim in additional loss‑adjustment expense and reserve carrying cost; at scale, millions annually for large carriers with thousands of SIU referrals

SIU Investigator Time Consumed by Low‑Value Cases and Manual Tasks

Millions per year in missed or delayed fraud savings for medium‑to‑large carriers, given that organized fraud rings can drive tens of millions in losses if not aggressively pursued

Regulatory Non‑Compliance with SIU and Anti‑Fraud Requirements Leading to Fines and Corrective Actions

$10,000–$1,000,000+ per enforcement action depending on jurisdiction, plus remediation and consulting costs (range based on typical state insurance penalty structures for statutory non‑compliance)

Systemic Insurance Fraud and Abuse Outpacing SIU Detection

Billions of dollars annually across the industry; for a single carrier, 5–10% of total claim costs are exposed to fraud risk and a portion remains undetected each year

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