Fraud Investigation
Barry Zalma
May 24, 2023
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The heart of any successful investigation of suspected insurance fraud is the insured’s statement. Its importance cannot be over emphasized, and it should be recorded electronically and then transcribed. The transcribed statement should then be sent to the insured to read, correct and sign.
The primary purpose of the statement is to establish and preserve the insured’s version of all aspects of the loss so that it will be difficult–hopefully, impossible–for the insured to change his version or attempt to explain away the inconsistencies, discrepancies, and misrepresentations that invariably arise as your investigation proceeds.
Insurers are compelled by statute and Regulation to maintain Special Fraud Investigative Units, publish and fulfill a detailed anti-fraud program and train all of their anti-fraud personnel. Compliance by insurers is less than constant across the industry. Some have effective fraud units while others simply identify one employee as their anti-fraud director although his or her work is almost totally adjusting claims and not investigating fraud. The expense of staffing and pursuing the anti-fraud efforts required by statute and regulation reduces the profits earned by the insurer and is believed to be offset by the lack of payment to fraud perpetrators. Of course, these efforts are also made difficult by the imposition of fair claims settlement practices regulations that require quick, complete, thorough investigations and fair treatment and prompt payment of insureds even when fraud is suspected. The two opposing sets of laws create a Catch-22 from which insurers find difficulty complying with both.[1]
Investigation techniques including, but not limited to, interviewing, photography of loss scenes, use of independent experts, use of private investigators and use of claims counsel all are part of the required thorough investigation.
Since exposing fraudulent activity, if it exists at all, is a goal of an insurance claims investigation that really wants to find a proper, honest and viable claim, accuracy is crucial. There must be no confusion about the circumstances of the loss, the items claimed, and the amount claimed–in short, all aspects of the suspected claim. It is more important to the claims person to find that the suspicious claim is, in fact, proper and remove all doubts. It is a successful claims investigation. Finding sufficient evidence of fraud to defeat a claim is important, but not as important as paying promptly a legitimate claim.
Obtaining a complete statement, the first time out is preferred because second and third truthful statements become more and more difficult to get as the investigation matures. The most obvious reason for this difficulty is that the insured becomes wary or suspicious of the repeated inquiries and will be reluctant to cooperate. The professional claims person will want the investigation to be accomplished quickly so that the insured will not realize what’s going on and take steps to cover his tracks.
Accuracy and completeness are also essential as a process of verification necessary to ascertain whether what the insured reports and claims is, in fact, true or false. Of course, verification is accomplished by contacting the various sources of the true information, such as retailers, prior carriers, agents, adjusters, and law enforcement agencies–all of which is covered.
The statement the claims person obtains may be relied on to pay a legitimate loss, to deny the claim because it was not caused by a peril insured against, to deny a claim because of attempted fraud by the insured, used as evidence to rescind the policy and/or defend against a civil suit by the insured, and because the statement itself is the most direct evidence of insurance fraud. The recorded statement may also be used in a criminal prosecution of the insured. The importance of the statement and the requirement that it be meticulously performed and transcribed is important and essential to each claims investigation.
[1] For detail consider Barry Zalma’s book California SIU Regulations 2020 available on amazon.com.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
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Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://lnkd.in/gfFKUaTf.
Consider subscribing to my publications at substack at https://lnkd.in/gcZKhG6g
Go to Newsbreak.com https://lnkd.in/g8azKc34
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://lnkd.in/gSwXaUhz; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88; https://lnkd.in/gAXsGjdi; Go to the Insurance Claims Library – https://lnkd.in/gWVSBde.
Insurer’s Exclusion for Claims of Assault & Battery is Effective
Post 5250
Read the full article at https://lnkd.in/gBzt2vw9, see the video at https://lnkd.in/gEBBE-e6 and at https://lnkd.in/gk7EcVn9, and at https://zalma.com/blog plus more than 5250 posts.
Bar Fight With Security is an Excluded Assault & Battery
In The Cincinnati Specialty Underwriters Insurance Company v. Mainline Private Security, LLC, et al., Civil Action No. 24-3871, United States District Court, E.D. Pennsylvania (December 16, 2025) two violent attacks occurred in Philadelphia involving young men, Eric Pope (who died) and Rishabh Abhyankar (who suffered catastrophic injuries). Both incidents involved security guards provided by Mainline Private Security, LLC (“Mainline”) at local bars. The estates of the victims sued the attackers, the bars, and Mainline for negligence and assault/battery. The insurer exhausted a special limit and then denied defense or indemnity to Mainline Private Security.
INSURANCE COVERAGE
Mainline had purchased a commercial ...
Marine Insurer May Dispose of Vessel to Avoid Waste
Post 5249
Read the full article at https://lnkd.in/gfn_UHdp, see the video at https://lnkd.in/gDWVccnr and at https://lnkd.in/gv9nsBqk, and https://zalma.com/blog plus more than 5200 posts.
In Western World Insurance Company v. The Estate Of Shawn Arsenault, No. 25-cv-13413-PGL, United States District Court, D. Massachusetts (December 17, 2025) the USDC was asked to resolve a marine insurance dispute after the sinking of the F/V Seahorse, a commercial fishing vessel, off Cape Cod on June 8, 2025. The vessel’s owner and operator, Shawn Arsenault, died in the incident.
Western World Insurance Company issued a hull insurance policy for the vessel. With no personal representative yet appointed for the estate, the insurer cannot determine the proper payee for the insurance proceeds.
The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Marine Insurer May Dispose of Vessel to Avoid Waste
Post 5249
Read the full article at https://lnkd.in/gfn_UHdp, see the video at https://lnkd.in/gDWVccnr and at https://lnkd.in/gv9nsBqk, and https://zalma.com/blog plus more than 5200 posts.
In Western World Insurance Company v. The Estate Of Shawn Arsenault, No. 25-cv-13413-PGL, United States District Court, D. Massachusetts (December 17, 2025) the USDC was asked to resolve a marine insurance dispute after the sinking of the F/V Seahorse, a commercial fishing vessel, off Cape Cod on June 8, 2025. The vessel’s owner and operator, Shawn Arsenault, died in the incident.
Western World Insurance Company issued a hull insurance policy for the vessel. With no personal representative yet appointed for the estate, the insurer cannot determine the proper payee for the insurance proceeds.
The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Zalma’s Insurance Fraud Letter
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ZIFL Volume 29, Issue 24
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
Zalma’s Insurance Fraud Letter
Merry Christmas & Happy Hannukah
Read the following Articles from the December 15, 2025 issue:
Read the full 19 page issue of ZIFL at ...
The Professional Claims Handler
Post 5219
Posted on October 31, 2025 by Barry Zalma
An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
How to Create Claims Professionals
To avoid fraudulent claims, claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
