Insurers appear to be waging a losing battle in their war againstfraud. Consider this: Property/casualty insurance fraud cost carriers $21billion in 1998, according to the Insurance Information Institute. Andexperts peg the annual cost of life and disability fraud at $5 billion, andhealth care fraud at $95 billion.Why is fraud so rampant? For starters, the sheer volume of claims-anestimated 116 million property & casualty claims were submitted in 1998-isoverwhelming carriers' claims adjusters and trained special investigativeunit staffers. Also, the complexity of fraud is increasing as professionalfraud "rings" continually devise new methods of bilking carriers.

Technology certainly has helped insurers improve the speed and accuracyof identifying fraud. The development of massive, Web-accessible databasesthat enable claims investigators to search for clues, coupled with softwarethat helps investigators piece together small bits of information, havevastly improved the detection of fraudulent claims. But in most cases,insurers are identifying fraud long after the check has been cut to pay theclaim.

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