Abstract
The insurance industry in the United States consists of more than 5,000 companies with over $1.8 trillion in assets. While competition is intense, insurance carriers have been faced by a relatively new threat in the form of Insurance Fraud, which is threatening to erode their bottomlines. Insurance Fraud, by definition, is the filing of fabricated or exaggerated claims to an insurance company by policyholders or third party claimants.

According to a published study by the Coalition against Insurance Fraud (CAIF), fraud is among the most prominent cost components, which escalates the costs of insurance. The CAIF has estimated the annual loss figures relative to insurance fraud (non health insurance) to be approximately $26 billion. The life/disability insurance segment of the industry opines that approximately $1.5 billion is lost each year through fraudulent schemes.

Currently, most of the carries use manual methods which are highly dependent on information provided by claims adjusters and agents for detecting fraud. A significant number of these carriers detect uncommon conditions and unscrupulous intentions by introducing certain rules in the transaction administration system. A select few of these carriers use analytical software to aid their investigation process. This small percentage of insurers who use analytical software see a large payoff in terms of lower amount of lost claim dollars.

This paper outlines the role of new tools and technologies for detecting Insurance Fraud and describes the benefits Insurance carriers can derive from using these technologies.

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