Be Prepared when a Flood of Claims Hits
Aug 16, 2023
Ruud van Gerwen
As we’ve seen all over the news, extreme weather events are seen more and more often. Ranging from heavy rains and landslides in Norway, Denmark, and Sweden, floods in Australia, intense hail storms in Italy, to hurricanes and wildfires in the US. These are all coming towards us in full force. Frequency and impact are increasing, and at this moment seen as the most impactful events on business discontinuity. That’s why insurers need to be prepared for the flood (no pun intended) of claims after such catastrophes.
Most of these claims will be legitimate however, fraudsters know that overwhelmed adjusters are going to be easier to fool during these catastrophic events. Easy targets for fraudsters are high volume, low severity claims like food spoilage, vandalism, or theft. Often junior adjusters, and adjusters from other departments are assigned these types of claims, and their unfamiliarity with how these claims should progress leaves them vulnerable to letting fraud through. Here are a few things those adjusters can review to quickly determine the legitimacy of a claim:
Check previous claims
A quick claims check can determine if a person is trying to double dip for food spoilage. Usually, a food spoilage claim within the past 6 months is considered suspicious. With this indicator what often happens is an individual who made their first claim saw how easy it was to get paid. They are in need of money for some short term expenses that often occur during trying times and think they can make another claim to get some quick money. Ensure the adjuster gets a recorded statement and asks questions about what food they bought and when. Get photos of receipts or of the food in question. Ask for a report from the utility company showing their power was out.
Check policy history
If the customer opened a policy after a storm and is now claiming food spoilage then we need to determine when the loss occurred. Again a recorded statement is needed and the adjuster must lockdown when the customer's power went out, if it went out prior to having the policy, and how long the power was out. If the power went out prior to having the policy the adjuster should determine if any food was spoiled from the first outage. If so, ask for receipts for the new food that was spoiled. Otherwise, find a way to verify that the power was out for the dates mentioned by the individual.
Was the power even out
On every claim the adjuster should ask when the power went out and when/if it has come back on. They can ask if the power is currently out. When an adjuster should dig deeper is when some other elements of the story aren’t making sense. Then it is time to validate the cause of loss. One way to do this is to verify the power outage with the insured’s power company – a quick search of the power company's website will determine if the power is out in the area of the insured. The only other way to check would be by calling the company. This is however time consuming.
One thing to note is that the adjuster may not catch the fraudster red-handed, however in these situations, if the claims process has a little friction added to it a fraudster will think twice before trying this scheme again. Many times fighting fraud simply means making it harder for the fraudster to do business. Hopefully, this information will help your company during this busy and stressful time.
Be prepared for the flood of claims
A month from now when things have calmed down and you are doing an after-action, and you are wondering how can we be more efficient in handling these claims I would suggest you think of a Trust Automation strategy. Ask yourself – how would your processes change if you could truly trust your customers. How much would they trust you if you could pay them faster than any other insured? How much will your bottom line increase if this frees up time for the claim handlers to have a closer look at claims that really matter?