How Investigative Firms Fight Claims Fraud

Investigative firms are an overlooked part of the insurance claims ecosystem. As the world grows more complex and more digital, so do schemes for fraud. Unlike the fraud of earlier years (“pulling the wool over someone’s eyes” has its origins in antiquity), claims fraud today is a more delicate operation. 

In 2022, a Palm Springs insurance agent diverted over $75,000 from a prominent art dealer and philanthropist by misappropriating premiums, which never made it to the insurance company. Another California insurance policy scheme fraudulently obtained more than $1.4 million in commissions. 

And the trends are moving even more quickly. In 2021, the Insurance Bureau of Canada pointed to three areas where consumers were most vulnerable: staged collisions, body shop or towing scams, and cyber attacks. In 2025, the Association of Certified Fraud Examiners said their top 5 fraud trends related to generative AI (phishing, romance scam), cryptocurrency, fake AI services, and synthetic identity. 

Insurance carriers, claims teams, and law firms may not always have the resources to protect against high-tech, very complex fraud (like AI-powered cyber crime), but investigative firms often do. These firms partner with insurance carriers, legal teams, and third party administrators. Their role can span from claim details to surveillance, such as capturing someone snowboarding after they claim limited mobility. 

The Role of Investigative Firms in Industry

Investigative firms play a role somewhere between the private detective and forensic auditor – they’re hired by insurance carriers to review claims, especially in lines like home, life, disability, and personal injury. For Third Party Administrators (TPAs), they tackle the in-depth investigation associated with a file. Law firms may employ investigative firms to look into any manner of case-related crime, and for large entities (like public sector or federal organizations), there has been research on in-house investigation. 

Investigative firms can span a wide range of services, including actual surveillance, background checks, interviews, witness statements, digital forensics or document verification, and social media/online presence analysis (OSINT). 

Impact on Claims Fraud Detection

Fraud adds hundreds of thousands of dollars each year to policy premiums, and with severe weather pushing up losses, insurers are already feeling pressed for payment. With 90% of insurance executives ranking AI high on their 2025 priorities, and it's easy to see why –  more advanced tech can lead to fewer costs, but also to fewer fraud cases and earlier detection.  

Investigative firms add an additional level of protection. They offer evidence to deny questionable claims submission, have costs that can often be recovered with legal actions, can expose widespread cases (like fraud rings in certain areas, especially in auto or health insurance). Just like in the ‘broken windows theory’, where fixing one window in a neighborhood can reduce disorder in the area, catching one of these fraud rings with swift investigation can end up saving claims providers a lot of headache. 

Areas for Process Improvement

As fraudsters become more tech-savvy, so do we. Our digital footprints can introduce huge volumes of data, and another party in the claims process might mean more paperwork. There is room for tech to smooth the process, allowing for a smoother hand-off between the investigative firm and the claims expert. 

AI and predictive modelling tools can help by predicting the claims where an investigative team will be needed, and can help the investigative experts stay in line with legal framework or evidentiary standards. 

Fraud has been around since antiquity, and investigative professionals will always be needed. Investigators can offer the case by case precision and security that claims teams need to stay ahead of each case – and AI technology can help by making sure their expertise is used efficiently.