After natural disasters like wildfires, hailstorms, or floods, some homeowners are tempted to exaggerate or even make up insurance claims. While it might seem harmless to some, this type of fraud costs the insurance industry billions every year—money that ultimately affects all policyholders.
According to the National Insurance Crimes Bureau, about 10 percent of claims after disasters involve fraud. Overall, these false claims add up to $45 billion in losses annually. The problem is getting worse, especially as advanced AI tools make it easier to create fake but convincing documents to support fraudulent claims.
Many perpetrators think of insurance fraud as a victimless crime. They might lie about when damage happened or how bad it was, believing they can’t be caught. For instance, a homeowner might claim hail damage occurred after their coverage began, even if it happened earlier. But this growing problem is making it harder and more expensive for insurers to offer coverage, especially in high-risk areas.
One way insurance companies can help fix this is by cracking down on fraud. Unlike natural disasters, which they can’t control, fraud is something insurers can tackle right away. Clearing this hurdle means they can offer more affordable insurance to more people.
The good news is that stopping fraud doesn’t have to be complicated or require more staff. Insurers can use new digital tools to quickly check where and when damage happened. This speeds up claims and helps keep expert claims adjusters focused on cases that really need a closer look.
A key tool in this fight is forensic weather data. Unlike general weather forecasts, forensic data shows exactly when and where storms occurred and how severe they were. This helps insurers spot claims that don’t match the facts. For example, Cotality’s Weather Verify tool creates detailed reports on hail, wind, and lightning storms. These reports help claims professionals decide whether damage claims line up with actual weather events, cutting down on false claims.
Another important tool is automation. Cotality’s Claims Validate uses rules-based systems to automatically review repair estimates. When the system spots something unusual, it flags the claim for a person to review. It can even be customized to focus more closely on high-risk areas or situations where fraud is more common. By speeding up the review process and catching suspicious claims early, this tool helps prevent fraud before payments go out.
The rising wave of insurance fraud is a big part of why coverage has become so expensive and hard to get after disasters. Fighting back with better data and smarter technology could make a real difference. Insurers adopting these kinds of tools can better protect themselves, and us, from the cost of false claims.
As extreme weather events become more frequent and intense, cracking down on insurance fraud is more important than ever. Using accurate storm data and automation could be the key to keeping insurance reliable and affordable, even in the most challenging times.