Finding technology to prevent claims adjustment tampering

Florida's state Division of Investigative and Forensic Services is investigating accusations that insurers altered independent adjusters' reports on damage caused by Hurricane Ian in September 2022. This situation is exposing vulnerabilities in claims reporting by adjusters but also bringing attention to technologies that could be applied to prevent tampering with damage reports in the future, according to a consumer service coalition and insurtech providers who focus on claims reporting issues.

Claims reporting has not caught up to the digital age, said Matthew J. Smith, executive director of The Coalition Against Insurance Fraud, a Washington, D.C.-based group with members from insurance organizations, government organizations and legislative bodies.

"Companies in this digital era have got to adopt new policies and procedures. They're still using phrases like 'records' and 'documents,'" he said. "They're not using the correct terminology of electronic data, data transmissions, PDFs."

Still, these digital information formats can be altered, as Smith explained. "The question becomes when an independent adjuster now submits [their] report through an electronic format, how easy is it for that insurance company to then take that document and alter it and change it so that it no longer accurately reflects the professional opinion of the licensed independent adjuster," he said. "In the digital era, it creates even more of a risk because of the quite frankly, quality of amendments, changes, and even illegal, counterfeit amendments being made to digital documents. We're talking about very simple ways to go in and alter a PDF, or a digital file that is sent from an independent adjuster to an insurance company."

Smith counsels that insurers should have corporate policies and procedures to make alterations of estimates "a fireable offense, if it is shown that one of their employees is altering or changing these in any respect, especially when it's to the detriment of the policyholder," he said.

Insurtechs Neptune Flood and RocketPlan offer technologies that verify damage reports and claims. Neptune, founded in 2016 and based in St. Petersburg, Florida, checks that a flood claim is indeed a flood claim and not mischaracterized, for instance.

Jeremy Scott

"In the flood business, floods are water that rises from below and your homeowners insurance covers you when it's water from above," said Trevor Burgess, CEO of Neptune. "If a hurricane comes through, and the only damage is that the roof comes off, but there was no inundation of water, and then some rain ruins the second story of your house, someone might file that as a flood insurance claim, innocently misunderstanding that, that's what a flood is." 

Neptune applies an AI engine to risk selection and pricing, collecting data including 12 million quotes in all and 3,000 claims on its policies. "There are some very good technology tools that we can use to then check that work and see, is this actually a flood claim?" Burgess said.

Similarly, RocketPlan authenticates data relevant to insurance claims, using a mobile device-centric interface for contractors and adjusters involved with property restoration after damages.

"It's time stamped and GPS stamped so the data integrity is automatically verified," said Joe Tolzmann, CEO of RocketPlan. "Then that information is used for scope of work, how many people do you need on a job, what kind of equipment we need, how many days. Then all that information becomes backup for quantifying the loss, estimating and billing." 

With the time and place data captured, "there's no doubt this loss was really there, and the picture isn't from somewhere else, or happened before the coverage was in place" Tolzmann said. "People can always do things that are against the law, even print dollars at home, if they want to. But it's less likely for people to get into conflict or do something out of line if it's clear and transparent, this is what happened and it's easily quantifiable. It just eliminates the doubt and minimizes giving someone the opportunity to try to do it because if they try, the evidence is there so they get caught."

The Coalition Against Insurance Fraud is supporting Florida authorities' investigation of the altered estimates issue. Smith said if charges are filed, it would send a strong message to carriers. "Florida is going to be a bellwether state on what other states look at, in terms of their laws and regulations to tackle and correct this problem," he said. 

Protecting an independent adjuster's report would not prevent an insurance company from making its own determination, but preserves the integrity of the claims process, Smith explained. "Insurers always have the right to challenge it and to question it, but it has to be aligned with communication with that independent adjuster following appropriate rules and regulations and policies at the company where that occurs, and then the independent adjuster either agrees or disagrees," he said. "Then the company can make a final decision what they want to do [about the claim]. They can in no respect go in and unilaterally change that independent adjuster's estimate on their own without consultation and without full disclosure to the policyholder."