As systematic fraud networks grow more sophisticated, organizations need to evolve their capabilities to stay ahead.
When most people think about insurance fraud, they picture a claimant staging an incident or inflating a claim. That still happens. But increasingly, the claimant is not driving the fraud. Instead, they are an unwitting participant in someone else’s insurance fraud scheme. In these cases, fraud is systemic and organized across a network of attorneys and treatment providers, with the claimant often caught in the middle.
Industry estimates suggest that 10% or more of property and casualty claims involve some level of fraud. Construction, retail and restaurant are common places for a familiar pattern: slip-and-fall claims, workers’ compensation abuse and inflated losses. Identity-related fraud is also rising across cargo, life and medical lines.
To stay ahead of evolving fraud tactics, organizations must build a defense strategy as coordinated and sophisticated as the threats they face. Here’s a closer look at the mechanisms driving systemic fraud and how to build an effective detection and prevention strategy.
How systemic fraud works
In a typical scenario, a person is involved in a real accident and connects with a plaintiff’s attorney, who directs them to a provider they work with regularly. Treatment follows: sometimes necessary, sometimes not. It may involve surgery, injections that offer little benefit or an excessive course of physical therapy. Because the attorney earns a percentage of the settlement, higher damages mean a larger fee. The provider gets paid per visit. The claimant may have no idea they are part of a broader scheme.
Using advanced analytics and extensive claim experience, patterns that are invisible at the file level begin to emerge: the same provider-attorney combinations, the same treatment paths, the same documentation language. In one case our team reviewed, a surgical report appeared across two different claims with identical details, including procedure time and recorded blood loss. Only the patient’s name and date had changed.
Systemic fraud isn’t just an insurer’s problem. Self-insured companies and those with large deductible programs are, in practice, funding their own losses. Even when fraud is eventually exposed, defense costs and payouts that accumulated along the way must still be absorbed, underscoring the importance of early detection and decisive action.
4 areas that matter most
Addressing coordinated fraud requires more than reviewing individual claims. Our seasoned claims professionals have combined advanced analytics and AI-powered detection tools with hands-on review across hundreds of thousands of files to identify four areas where insurers and self-insured businesses should focus.
- Build a data foundation that allows patterns to emerge.
Coordinated fraud cannot be seen in a single claim file. Detecting it requires advanced analytics applied across your full claims history, with robust claims experience that flags providers, vendors and attorneys with elevated fraud indicators for a more detailed review. For many organizations, that means working with a partner who has that infrastructure in place.
- Ensure the right detection systems (and people) are in place.
Combine claims expertise with analytics tools that flag unusual treatment frequency and repeated medical narratives. Scoring models identify high-propensity files early, but the model is only as good as what happens next. That means having dedicated investigators who can run background checks, conduct site visits and guide the claims professional on the underlying file, with your most complex cases going to your most experienced people.
- Create clear pathways from detection to action.
A strong signal means nothing without a process behind it: engage special investigation units, coordinate with legal teams and know when to bring in the National Insurance Crime Bureau, the FBI or local law enforcement. It is also worth understanding the litigation process upfront, since courts vary on what pattern evidence they will admit, which affects whether taking a case to trial is worth it.
- Know your appetite for fraud risk.
Not every suspicious claim warrants full investigation or litigation. Bear in mind that claims move forward before fraud is ever proven, and acting too aggressively on suspicion alone carries its own legal risk. Decide deliberately where to invest resources rather than making that call file by file.
Staying ahead of emerging fraud tactics
The goal is always to stay one step ahead. Advanced analytics and AI can now scan large claims datasets for suspicious patterns, flag unusual provider combinations and even identify AI-generated images submitted as fraudulent evidence.
At Gallagher Bassett, we’re bringing those capabilities into the claims process itself with our Waypoint Fraud Guidance program. The tool scores files at intake, midway through handling and at resolution for fraud propensity. The highest-propensity claims are routed to dedicated investigators and experienced handlers who are trained to pursue potential fraud while still treating legitimate claimants in good faith.
Building a coordinated response
Fraud is becoming more organized, and the response needs to match it. Having the right data, infrastructure, detection systems and action pathways in place is what separates companies that absorb fraud losses from those that get ahead of them.
That’s where the right partner comes in –– providing dedicated resources that turn insight into coordinated action across every claim.
To learn more about how we’re making a difference for our clients and partners, please connect with us today.
