Insurance claims carry financial, legal, and reputational risk. In the U.S., insurance fraud is estimated to cost over $308 billion annually, straining carriers and pushing oversight teams to do more with less.

The pressure is clear: identify fraud early, prove your decisions, and stay compliant without slowing down the workflow. But even experienced teams face challenges when investigations rely on disconnected systems, incomplete data, or manual reviews.

This blog breaks down how insurance claim investigations are typically conducted and the types of claims that are most frequently flagged for review. We will also explore how teams can enhance fraud detection and compliance by implementing better structure, clearer workflows, and tighter controls.

TL;DR

• Investigation protocols are gaining attention not only for loss prevention but also as indicators of overall risk maturity across claims and compliance.

  • Gaps in documentation remain a weak spot for many insurers, exposing them to scrutiny during audits, dispute resolution, or regulatory reviews.

  • Data quality at the claim intake stage has a significant impact on investigation outcomes, yet most insurers lack automated checks to identify and correct errors early.

  • The absence of a unified process across claims, fraud, and compliance teams often leads to inefficiencies, duplication, and blind spots in case handling.

  • As fraud methods evolve, insurers need structured, repeatable workflows backed by timely reporting, not just case resolution, but proof of process.

Why Insurance Claim Investigation Matters

Insurance claim investigations serve a simple but essential purpose: to verify the accuracy of claims and prevent payouts on false or exaggerated submissions. By doing so, insurers protect themselves from financial losses and help ensure that benefits reach policyholders who truly qualify.

When fraud goes undetected, the consequences extend beyond a single claim. Carriers may face rising loss ratios, regulatory scrutiny, and reputational damage. Legitimate policyholders can experience delayed claim approvals, higher premiums, and reduced trust in the system. Over time, unchecked fraud weakens the integrity of the entire insurance process.

4 Common Types of Claims Under Investigation

Certain types of insurance claims consistently require closer scrutiny due to their complexity, frequency, and potential for misuse. Investigators focus on verifying not just the event, but the context, timing, and legitimacy behind each detail submitted.

1.Workers' Compensation Claims

These often involve reviewing the location and timing of an injury to confirm it occurred during the course of employment. For instance, in one case, an employee claimed a back injury from lifting equipment on-site, yet surveillance showed them playing recreational sports the same day, off the clock.

2.Personal Injury Claims

Exaggerated or staged injuries are common in auto collisions or slip-and-fall incidents. A well-documented case involved a claimant who submitted a neck injury report following a low-speed accident, only to be found performing physically demanding tasks on social media just days later.

3.Property Damage and Theft Claims

Staged break-ins or inflated loss values are frequently flagged. Investigators often find discrepancies between reported damages and physical evidence or invoice records. Unusual timing, such as claims filed shortly after increasing policy limits, can also raise red flags.

4. Healthcare and Medical Claims

These may involve phantom billing (for services not rendered), upcoding (billing for a more expensive procedure than was performed), or unnecessary treatment. Investigators rely heavily on medical documentation, provider history, and patterns across past claims to validate legitimacy.

Each of these categories requires careful validation, often across multiple data points, to ensure payouts are justified and risk exposure is minimised.

Who Detects and Investigates Insurance Fraud?

Insurance fraud detection and investigation is a multi-role process.

Initial detection often starts with claims adjusters who flag inconsistencies during routine reviews. Suspicious activity is then escalated to Special Investigation Units (SIUs)—internal teams trained to assess fraud risks and gather supporting evidence. In more complex or sensitive cases, insurers may bring in external investigators, compliance officers, or risk management teams to review the facts, ensure policy adherence, and prepare for regulatory reporting.

Each role plays a distinct part:

• Adjusters surface early warning signs

• SIUs and fraud investigators handle deep-dive analysis and documentation

• Compliance and risk teams ensure the process follows legal and reporting standards

In some instances, third-party specialists or law enforcement may be consulted, especially when claims raise legal or criminal concerns.

The Step-by-Step Process of a Claim Investigation

Insurance claim investigations follow a structured process designed to verify facts, identify inconsistencies, and assess whether a claim should be paid, denied, or escalated. While the specifics may vary by claim type, most investigations include the following steps:

Step 1: Document Review

Investigators begin by collecting and reviewing documentation, including medical records, receipts, policy details, photos, and timelines. The goal is to establish whether the claim aligns with the coverage and if supporting materials are complete and consistent.

Step 2: Interviews

Claimants, witnesses, supervisors, or service providers may be interviewed to clarify details, confirm statements, or identify gaps. These conversations are often critical in assessing intent and detecting misrepresentations.

Step 3: Site Inspections

Depending on the case, a physical inspection of the location, whether it’s a workplace, vehicle, or home, may be conducted. Increasingly, remote inspections are used when appropriate, supported by geotagged photos, videos, or virtual walk-throughs.

Step 4: Evidence Collection and Validation

To support findings, investigators gather a combination of evidence types. This may include physical proof such as photos or video, social media activity, structured interview notes, and documented timelines. A well-maintained audit trail is also essential, capturing who reviewed what, when, and what actions were taken. The strength of a case depends on how well this evidence builds a clear and consistent view of the claim.

With digital investigation management and automation, Fortifai simplifies each step from intake to final reporting, ensuring speed and traceability.

Recommended: Generative AI for Fraud Detection

Challenges in Investigating Claims

Even with established processes in place, insurance claim investigations often face practical roadblocks that limit their effectiveness.

• Manual Effort Slows Resolution: Investigators frequently rely on spreadsheets, emails, and disconnected tools to manage cases. This not only consumes time but also increases the risk of oversight, especially when teams are juggling multiple claims.

• High Rate of False Positives: Rules-based systems tend to flag a wide range of claims, many of which turn out to be legitimate. Sorting through these false positives drains resources and shifts attention away from actual high-risk cases.

• Poor Data Quality Creates Gaps: Incomplete, inconsistent, or outdated information across systems can stall an investigation. Without clean, reliable data, even the most experienced teams struggle to connect the dots.

• Lack of Defensible Documentation: For claims that escalate to legal or regulatory scrutiny, missing or poorly recorded documentation can weaken the insurer’s position. A defensible, time-stamped trail is essential.

Fortifai solves these challenges with AI-driven anomaly detection, automated case tracking, and KPI dashboards that highlight investigation bottlenecks instantly. This allows teams to work faster, stay focused, and make strategic decisions with confidence.

Modern Tools and Techniques in Insurance Fraud Detection

Fortifai’s Risk Scenario Management uses hundreds of prebuilt fraud patterns to detect anomalies in real time, automating what manual systems often miss. With red/green flagging and configurable thresholds, investigators can focus quickly on high-risk cases while reducing time lost on false positives.

Alongside platforms like Fortifai, insurers increasingly rely on a range of investigative tools to validate claims and identify inconsistencies:

• Surveillance and Photography: Visual evidence remains a key part of many investigations. Photos and videos help verify damage, injury, or incident conditions and are often used to challenge claims when timelines or severity appear inconsistent.

• Social Media Intelligence: Public profiles can offer unexpected insights. Posts, check-ins, or shared media may contradict the details of a claim or help establish a timeline that wasn’t disclosed.

• Background Checks and Public Records: Investigating a claimant’s history can reveal prior suspicious claims, criminal records, or patterns that raise concerns. Third-party data is often cross-referenced to support or disprove claim details.

• Pattern Recognition via Claim History: Analysing past claims, both within the organisation and across shared industry databases, can help identify behaviours that match known fraud scenarios, ranging from staged losses to repeat filings.

Investigation teams rely on this mix of technology and behavioural insight to make faster, more informed decisions, and platforms like Fortiai bring it all into a single, unified view.

Legal and Compliance Considerations

Insurance investigations don’t happen in isolation. They operate within strict legal and regulatory frameworks, where even unintentional missteps can carry serious consequences.

Fortifai supports this process by capturing every decision, note, and action, helping teams maintain records that are both complete and compliant with regional regulations.

• Insurance Fraud as a Criminal Offence: Submitting false information during a claim is a policy abuse and prosecutable offence. Carriers must be prepared to refer cases to legal authorities when necessary, with clear documentation to support their actions.

• Data Privacy Requirements: Accessing and handling claim-related information, especially medical or financial data, must follow data protection laws such as HIPAA, GDPR, and others. Investigators need systems that limit exposure and track access at every stage.

• Maintaining Audit-Ready Records: Insurers are expected to show how and why each claim decision was made. Without clear timelines, investigator notes, and documented handoffs, the process becomes difficult to explain, especially during reviews or external inquiries.

Maintaining transparency, consistency, and control throughout the investigation is not just a matter of good practice. It’s essential for staying within the law.

Conclusion

Investigations are no longer limited to uncovering fraud after it’s occurred. They’re part of a broader risk management strategy, one that requires structure, speed, and defensibility at every step.

To operate effectively, insurers need a system that connects detection, investigation, and compliance into a single, accountable workflow. One that adapts to volume, supports audit-readiness, and gives teams full visibility into what’s working and what’s not.

Fortifai delivers that system. With a fully integrated platform for investigation, risk scenario management, and compliance reporting, Fortifai helps insurers respond with precision, reduce exposure, and take control of fraud-related losses before they escalate.

Schedule a demo to see how Fortifai helps your team in insurance claim investigations by improving speed, accuracy, and providing full traceability.

FAQs

Q1. What is the primary purpose of a claim investigation?

A1: Insurance claim investigations evaluate whether a claim is legitimate or manipulated. They rely on evidence, interviews, and record reviews to inform payout decisions.

Q2. How do insurers detect fraud in claims investigations?

A2: Detection involves reviewing documents, interviewing involved parties, conducting site inspections, monitoring social media, checking public records, and analysing claim patterns across multiple data sources.

Q3. What can a policyholder expect when their claim is under investigation?

A3: They may be asked for more supporting documents, interviewed for clarification, or subjected to an on-site inspection. Cooperation and timely responses help resolve cases efficiently.

Q4. How does poor data quality impact claim investigations?
A4: Inconsistent or incomplete information slows workflows, weakens findings, and leads to defensibility gaps during audits or regulatory review.

Q5. How can Fortifai help improve insurance claim investigations?
A5: Fortifai’s Risk Scenario Management includes hundreds of prebuilt fraud patterns and red/green flagging for anomalies, enabling real-time detection and allowing teams to focus on the highest-risk cases faster. Use prebuilt scenarios to scale fraud detection systematically and reduce false positives.