Filed Under:Claims, Investigative & Forensics

Using smart technology to combat insurance fraud

Technology is capturing far more data than many people realize, and now that information is showing up in court. (Photo: Shutterstock)
Technology is capturing far more data than many people realize, and now that information is showing up in court. (Photo: Shutterstock)

Insurance fraud has been an issue since the inception of insurance policies in the 18th century. It involves any act committed with the intent to obtain a fraudulent outcome from an insurance process.

Fraud can occur when a claimant tries to gain a benefit to which they are not entitled, or when an insurer knowingly denies a benefit that is due. Fraud by insurers and insureds is actionable in court. According to the Coalition Against Insurance Fraud, up to $96 billion is stolen each year through insurance fraud schemes, a number which could be much higher since no one knows how many fraud schemes are successfully executed without raising suspicion.

New ways to cheat

As fraudsters develop new creative ways to cheat insurers out of claims payouts, insurers have to re-evaluate their detection methods to decrease the payouts for false claims. Countless fraud attempts have been foiled by technology through security camera footage, personal social media sites, location applications, posted pictures, and YouTube videos. Since most adults use social media today, they often leave a trail of public information including what they think and say, what they have done, and who they are associating with, which allows insurance companies to uncover discrepancies between the public story and the one told when a claim was filed.

Related: Finding fraud after Hurricane Harvey

Through the Internet of Things (IoT) millions of data points are being collected on a daily basis from devices ranging from fitness trackers to pacemakers, to home security, video doorbells, climate control systems, and even some appliances. Many everyday wearable objects track steps, breathing, distance traveled, calories burned, heart rate and diabetes risk, and sun exposure; by no means an exhaustive list.

Smart home devices can allow the user to remotely open and close garage doors, adjust the thermostat, lock and unlock doors and windows, and monitor and interact with the refrigerator. This past year an increasing number of smart devices yielded some interesting information to uncover fraud.

legal motif with gavel and legal books

The data captured by new technology is making its way into the courtroom more and more. (Photo: Shutterstock)

Technology sleuths

Recently, an Ohio court determined that data gleaned from a pacemaker was admissible in what is believed to be the first case using data from a beating heart as evidence in an insurance fraud case. The fraudster stated that he was asleep when a fire started and he awoke to his home ablaze. He proceeded to pack some belongings in a suitcase and broke a window with a walking stick in order to throw the belongings out and escape through the window.

Several reasons to suspect arson arose, and the police obtained a search warrant for the data from the cardiac pacing device. The cardiologist who reviewed the data deemed it “highly improbable” that the defendant could have collected, packed, and removed the number of items from the house, exited the bedroom window, and carried all of the objects to his car during the short period of time that his heart rate was recorded as elevated. The court determined that the pacemaker data was similar to a blood sample, and was no more private or unconstitutional than medical records, which police can obtain for use as evidence in criminal cases.

A woman in Pennsylvania claimed she had been awoken and assaulted by an intruder. However, criminal charges were filed against her when her fitness tracker, among other evidence, showed she had not slept at all that night and she could not have been awakened by an intruder.

An Arkansas man was suspected of murdering a friend in 2015, and the Amazon Echo in the home was cited as a possible “witness” to the crime. Although police did not get the evidence to prove murder from that smart device, the suspect's smart water heater indicated that an exorbitant amount of water was used in the early hours of the morning in what police believe was an attempt to cover up the murder.

Wearable tech: Smartwatches & fitness trackers show evidence


Some attorneys are using wearable technology to help prove that their clients didn't attempt to cheat their insurers. Lawyers are using data gleaned via smartwatches and fitness trackers to show evidence of activity levels that are lower than those of others in a similar position. This data can be indicative of a workers’ compensation claimant who was actually injured on the job, and whose activity is hindered due to that injury.

The decision to allow in pacemaker evidence is the first of its kind, but follows a trend allowing social media content and smart device data to be discovered. This area of law is largely untested, and setting a legal precedent and constitutional privacy framework in direct response to smart technology will help to reassure consumers.

From an insurer's perspective, discovery demands must be narrowly tailored in order to produce relevant information and should be reasonably calculated to lead to the development of admissible evidence. If a fraudulent claim is made and evidence presented on social media proves the fraud, it is prudent to ensure that the evidence is admissible in court in case the insurer is sued for denying the fraudulent claim. Admissible evidence can then confirm that the claim was indeed fraudulent.

Useful tools for insurers and insureds


The possibilities of using smart technology in insurance coverage cases is growing. Smart cement can be used in place of regular cement and will be able to detect crumbling, cracking, warping and stressing. In the event of a collapse, insurance companies could prove that the state knew or should have known that the bridge was at risk of collapsing, thus reducing paid-out costs.

Smart ovens can warn homeowners if their oven is at risk of being engulfed in a fire. Smart locking systems and alarm systems can show insurers if a break-in occurred or if the homeowner is trying to file a phony burglary claim. Fitness trackers can show if a homeowner was really out for a run while the house caught fire. Although accessing data collected from smart technology might not be practical in the initial stages of an investigation, and the sheer amount of information available may make it difficult to sift through, smart technology is a useful tool for insurers and insureds alike.

Hannah E. Smith, JD, (hsmith@alm.com) is a staff writer with FC&S Online, the authority on insurance coverage interpretation and analysis for the P&C industry. It’s the resource agents, brokers, risk managers, underwriters, and adjusters rely on to research commercial and personal lines coverage issues.

Related: Make that Fitbit a lie detector

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