Why Would an Insurance Company Investigate a Claim?

When you file an insurance claim after an accident, loss, or injury, you expect the insurance company to review the details and pay out your benefits. However, it’s not always that simple. Insurance companies often conduct thorough investigations before approving claims.

So why exactly would an insurer investigate a claim that you make? There are a few key reasons:

To Determine Liability

One of the main goals of an insurance claim investigation is to establish liability i.e. who is at fault for the damage or loss.

For instance, in case of a car accident claim, the insurer will try to determine which driver was responsible. This helps the insurance company decide who should pay for the damages.

If the policyholder was not at fault, the claim is likely to be approved and paid out. But if they were partially or fully liable, the claim could get denied or the payout amount may be reduced.

To Assess the Validity of the Claim

Insurance companies are always on the lookout for fraudulent or exaggerated claims. By thoroughly investigating a claim, they can determine if it is legitimate and the policyholder is genuinely entitled to the benefits.

Some common types of questionable claims that insurers watch out for:

  • Staging accidents to file injury claims
  • Filing claims for losses that never occurred
  • Exaggerating the extent of damages or injuries
  • Hiding relevant information

Investigations help insurers separate valid claims from fraudulent ones.

To Determine Policy Coverage

Investigations allow the insurance company to evaluate what policy coverages apply to the claim.

For instance, they’ll review whether the cause of damage is covered under the policy wording, whether all premiums are paid up to date, if exclusions apply, and if policy limits are adequate to cover the claimed amount.

This helps the insurer decide the appropriate settlement amount as per the policy terms.

To Prevent Insurance Fraud

Insurance fraud costs companies and policyholders billions of dollars each year. Investigations to validate claims are an important tool to reduce fraud.

Some common red flags insurers look for:

  • Inconsistencies in the claimant’s statement
  • Severity of damage doesn’t match the description of the accident
  • Prior history of frequent claims
  • Errors or discrepancies in supporting documents

By identifying suspicious patterns and digging deeper, insurance companies can prevent fraudulent payouts. Robust claim investigations act as a deterrent for scammers.

To Determine Accident Fault

For motor insurance claims after an accident, the insurer will conduct an investigation to determine which driver was at fault.

This involves:

  • Reviewing the police report
  • Interviewing drivers and eyewitnesses
  • Visiting the accident scene
  • Examining damage to both vehicles
  • Assessing road, weather and traffic conditions

The findings help establish liability and decide who was responsible for causing the accident and hence needs to bear the damages.

To Confirm Damages and Injuries

If the claim involves property damage or bodily injuries, the insurer will verify whether the claimed losses are authentic and match with the facts of the accident.

For property damage, they may:

  • Inspect the damaged vehicle, premises or items
  • Review repair estimates
  • Compare the extent of damage with the accident circumstances

For injuries, they may:

  • Obtain medical reports
  • Check doctors’ credentials
  • Look for preexisting conditions
  • Arrange an independent medical exam

This helps insurers determine accurate compensation.

To Prevent Double Payment of Claims

Sometimes claimants file the same claim with multiple insurers to get paid twice for the same loss. Claim investigations enable insurers to detect such instances of double-dipping.

By coordinating with other insurers and cross-checking details, they can identify duplicate claims and prevent unjust enrichment of policyholders at the cost of the insurance company.

To Detect Potential Red Flags

Claims investigators are trained to spot anomalies that could indicate fraudulent activity or inflate the claim amount.

Some examples of red flags:

  • The damaged item was just recently purchased but claim is filed for the full original cost
  • Severity of injury and treatment don’t match the accident circumstances
  • Bills from multiple health providers for a single accident
  • The claimant has a history of prior claims

By probing these red flags during an investigation, insurers may uncover invalid claims.

To Determine Appropriate Claims Settlement

A proper investigation helps the insurance company arrive at a fair settlement amount as per policy terms and the damages caused.

It provides answers to important questions like:

  • What policy coverages and limits are applicable?
  • What is the appropriate reimbursement for specific damaged items?
  • Is the treatment medically necessary or prolonging recovery?
  • Are there any offsets to be applied like depreciation?

With these details, insurers can make informed and equitable claim settlement decisions.

To Recover Money from Liable Parties

For claims where a third party is liable, insurers investigate to establish negligence or liability.

This is needed when they want to recover the claim amount paid out to the policyholder from the actually responsible party, through demands or lawsuits.

Diligent investigations provide solid evidence to facilitate this claims recovery process.

To Develop Underwriting Insights

Claims data is a treasure trove of insights for insurers’ underwriting and risk management teams.

Investigation findings enable them to identify:

  • High-risk geographies, occupations, vehicles, breeds of dog, etc.
  • Common accident circumstances and causes
  • Frequency and cost trends of certain types of claims
  • Risk factors and patterns requiring premium increases or coverage restrictions

These data-backed insights improve underwriting profitability and pricing accuracy.

To Identify Possible Subrogation Opportunities

Subrogation allows insurers to recover claim amounts from negligent third parties. Investigations help identify potential subrogation opportunities.

For example, a fire investigation may reveal the blaze was caused by faulty electronics made by Manufacturer X. This allows the insurer to take legal action against Manufacturer X to reclaim the claim amount paid to the policyholder.

Thorough claim probes are crucial to detect promising subrogation potential.

The Bottom Line

Insurance companies have a legitimate need and valid reasons to thoroughly investigate claims before settlement. It protects them and policyholders from fraudulent claims and enables equitable claim payments as per policy terms.

While claim investigations are a necessary part of the insurance process, they shouldn’t become harassment or an excuse to delay processing genuine claims. If you feel an insurer is treating you unfairly, consulting an insurance attorney is advisable to get the claim resolved objectively.

Uncovering How Insurance Companies REALLY Investigate Claims | Private Investigator Training Video


What does it mean when an insurance company is investigating a claim?

What is an Insurance Claims Investigation? Insurance companies often conduct claims investigations to evaluate the legitimacy of a claim. The investigation process helps the claims adjuster make an educated decision about how to proceed with a claim.

What powers do insurance investigators have?

Surveillance and gathering evidence from crime scenes: Surveillance is a huge benefit of hiring a private investigator, as they can complete this ethically based on federal and state guidelines. An insurance investigator will exercise caution recording suspects and observing a claimant under surveillance.

Why is an insurance investigator calling me?

Insurance Companies Want to Investigate Your Claim Insurance companies investigate claims to look for ways to settle as cheaply as possible. The easiest and most common way to avoid paying is by questioning whether their policyholder is at fault.

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