Recessionary Auto Injury Claiming: Lessons From History

CCC Corporate / Casualty /

By Kenna Henn and W. Scott Palmer, AIS, a CCC Company


While the world is coping with the economic fallout due to a pandemic from a novel virus, the implications of an economic downturn to insurance claims — and more specifically auto injury claims — are not novel. Previous economic downturns, especially the Great Recession, provide a roadmap for what we can expect with intentional fraudulent behaviors or opportunistic buildup of legitimate casualty claims during the pandemic.

Unique attributes of this economic downturn, such as the use of telemedicine, could further open doors for fraud or buildup pertaining to injury claims. So, what can a claims organization do to help defend against today’s fraudulent/opportunistic injury activity?


Fraud/buildup frequency in soft tissue injury claims

In a 2004 Insurance Research Council (IRC) study, data showed that 69% of claims with sprains or strains as the most severe injury did not have the appearance of fraud or buildup. However, if fraud or buildup exists, the study showed that it is far more likely to occur in this segment of claims. For example, sprains or strains were listed as the most serious injury in 79% of BI claims with the appearance of fraud.


In another IRC study, researchers found that 21% of bodily injury claims and 18% of personal injury protection claims closed with payment in 2012 had the appearance of fraud and/or buildup. This creates a challenge for claims organizations because roughly four out of five auto injury claims do not have fraud or buildup. Buildup was the most common type of abuse in the study, accounting for 15% of dollars paid for BI and PIP claims in 2012.

An important takeaway from this data is that to be thorough and effective, injury fraud/buildup detection methods must be scalable to evaluate the largest segment of claims processed by a claim organization. This suggests that the claim organization should be equipped with tools to evaluate potential fraud/buildup at scale in addition to smaller, specialized investigative units/processes.


Measuring accident severity

Delta V (DV) is defined as the change (the D) in velocity (the V) that a vehicle experiences in a collision during the timeframe in which the collision occurs. In short, it is a measure of a collision’s severity in generally accepted engineering terms. This change in velocity, along with principle direction of force, can be used to assess the likelihood of injury in an automobile accident.

From September 30, 2018 to the COVID-19 period in early May 2020, average DV for vehicles with moderate to severe impact increased to all-time highs for both frontal collision claims and rear-end liability claims. The increase in rear end liability DVs is far more pronounced.

This increase can be explained by an increase in average driving speeds and/or an increase the differential weights of vehicles. Data sources suggest that both phenomena have occurred during the COVID-19 period.



What are the implications of an increase in DV for this accident segment to auto insurers? Quite simply, higher costs per claim. It is generally accepted that higher DV accidents increase the risk of injury to occupants as well as increase the severity of injuries to occupants.


What to expect this time

COVID-19 has dramatically changed driving behavior nationwide, and miles driven were down 65% in April 2020 compared to January 2020. But with less congestion on roads, there was a 27% increase in speeding and a 20% increase in crash frequency per mile.

As the public and private sectors go through what is expected to be a lengthy period to digest the economic impact experienced from the initial COVID-19 responses, very few entities will be immune to the pressures of economic scarcity and, as a result, the potential for temptation when an injury claim exists.

Motivation or pressure to commit fraud or buildup is one of the three core influences in Cressy’s Fraud Triangle, and a sudden loss of income is certainly motivating. During the Great Recession, referred cases of insurance fraud spiked by 21% as economic conditions in Florida worsened in 2008-09. The Florida Division of Insurance Fraud reviewed increases in insurance fraud referrals in other states to demonstrate that the link between the economic downturn and ballooning fraud is clearly a nationwide phenomenon.

Also, under the current pandemic, social distancing is the new normal. Health care and health care plans are rapidly adjusting to permit the delivery of health services — including telehealth — while maintaining social distancing, and patients are following suit. Between February and March 2020, the number of U.S. adults who reported intent to use telemedicine rose from 18% to 30%.

Increased use of telehealth services could provide an easier method by which to perpetrate fraud or buildup in sprain/strain injury claims, thus exacerbating fraud/buildup behavior in a telemedicine environment. In these fraud or buildup claims, in large part, symptoms can exist simply because the patient says they exist.


What is a claim organization to do?

As the unfortunate influences of the deteriorating economy work their way into auto injury claims, the challenge for insurers will be to cost effectively instill the practice of vigilance into the claim organization. This balanced vigilance must be executable in remote or work-from-home environments, where operational controls are more difficult to maintain.

Unlike in prior economic downturns, available technologies have been combined into a single solution that offers fraud fighting approaches of the past as well as new configurable solutions to face the unique challenges of the present. Functionality includes:

  • Auditing medical bills.
  • Ordering professional medical reviews.
  • Evaluating injury causation by using the physical damage of the vehicle and the physics of the collision to assess the likelihood of injury.
  • Flagging telemedicine procedures for adjuster attention when other elements of the claim indicate a questionable injury claim.
  • Providing analytics and dashboards to monitor execution and organizational impact.


Combining science-based techniques with traditional evaluation tools provides insurers with a balanced and objective approach to evaluate the many sprain and strain claims presented, and to effectively identify which claims may involve fraud or buildup.


See how CCC can help adjusters access and evaluate causation using telematics and physical damage data. Visit CCC’s Casualty Claims page to learn more and explore our digital solutions.