Reflections on a Four-Decade Fight Against Fraud

Matthew Smith discusses retirement, his career, and the industry's challenges and opportunities

March 08, 2024 Photo

Retirement. That word is still sinking in. For me, there will hopefully always be a realignment and not an end. But it was time to make a change after four decades of helping U.S. consumers and insurers fight against insurance fraud crime, capped off by the incredible experience of leading the world-renowned Coalition Against Insurance Fraud.  

Yet, as I write this, it seems more like “what I did over my summer vacation” than a career retrospective. Sure, there were roadblocks, frustrations, and missteps along the way, but far more often were days when I thought, “This is so much fun I cannot believe I am getting paid to do this!” Fighting insurance fraud is the accidental profession. I have never met anyone who set out to be an insurance fraud investigator or attorney, but for those of us who are a part of this great profession, we cannot imagine doing anything else.  


Over the past four decades, the world of insurance fraud investigation changed. Data analytics allow tracking and linking of fraudsters in seconds, compared to our use of Post-it Notes and yarn for link-analysis. Insurers and regulators alike pay more attention to insurance fraud thanks in large part to public information campaigns, promoting slogans such as, “the crime we all pay for,” and the Coalition’s groundbreaking 1995 study on the economic impact of insurance fraud in America. 


Above all else, insurance fraud has gone global. For decades, we treated insurance fraud as a local crime. Most insurers had nearby claim offices staffed with adjusters and investigators. Personal contacts were made with police and fire agencies, especially since most investigators at that time came from a prior law enforcement career. Those days are now gone. Today, an insurance fraudster with a laptop and an internet connection can commit insurance fraud from anywhere in the world with ease. Stolen identities are sold on the dark web. And now we see voice and facial expression cloning used to create synthetic “claimants” who only exist in the digital realm. Fraud fighting today combines new challenges and opportunities in our connected world. 


My own anti-fraud story began in 1985 when the first law firm I worked for after law school assigned me a suspicious boat fire claim. I was hooked and never looked back. It was not until attending a Florida Bar conference that I learned about attorneys focusing their practices on fighting insurance fraud. When I decided to start my own law firm, I knew from the start that investigating insurance fraud, and defending the resulting bad faith claims, was where I wanted to be.  

Over decades, insurance fraud cases took me from Alaska to Puerto Rico and more than 30 states along the way. I encountered a multitude of claims professionals, Special Investigation Unit (SIU) investigators, and both state and federal officials. I can confidently say, almost without exception, persons in this profession are motivated to seek the truth and reach the correct claim decision. The best SIU investigation seeks a logical and reasonable explanation for payment of the claim. My greatest fear in any investigation was getting it wrong. Everyone involved in fighting insurance fraud has the absolute duty to make certain investigations are professional, impartial, and accurate. When evidence of insurance fraud is found, though, a claim is never “denied.” You cannot deny something which they were never entitled to because of their own deliberate acts. Insurers should stop allowing others to misrepresent a “claim decision” by unfairly calling it a “claim denial.”  


Trying insurance fraud cases before juries is an exhilarating experience like no other. An insurance fraud case combines everything you see in TV shows like “CSI” and “The Practice.” Fraud cases utilize forensic sciences including fire origin and cause, chemistry, accident reconstruction, financial analysis, and medical expertise, among many others. We must encourage young people to consider insurance fraud fighting professions. So many career paths exist, whether as an investigator for an insurer or private company, state regulatory or law enforcement officer, and, of course, as a civil insurance attorney, prosecutor, or state attorney. The rewards are many, including a career where there is never a dull moment.  


The insurance fraud-fighting community is in dire need of more diversity, equity, and inclusion (DEI). While far better than the nearly all-white and mostly former law enforcement composition of anti-fraud teams decades ago, there is still a long way to go. In 2021 the Coalition adopted a strong DEI statement and urged insurers to create scholarship programs and internships for students who express an interest in anti-fraud careers. Such efforts should be open to all students, but special emphasis should be made for outreach and recruiting at historically Black universities and colleges.  

No one can say the nation’s anti-fraud organizations are not leading the way when it comes to DEI. A look at the current leaders of the Coalition, the International Association of Special Investigation Units (IASIU), and the National Insurance Crime Bureau shows a diverse group with tremendous records of fighting fraud. 

The future holds both exciting opportunities and challenges. One of the questions I am asked is, "What are the greatest challenges to fighting insurance fraud?" While there are many, right now the biggest threat may be coming from insurers not paying enough attention to anti-fraud efforts. While every insurer, and insurance trade association, will say it is committed to fighting insurance fraud, the pressure to cut costs and eliminate staff is having a negative impact on protecting both insurers and consumers from the high cost and damage of fraud. Recent layoffs, incomplete information on fraud referrals, and increased consumer complaints about becoming fraud victims are leading to regulators considering whether further oversight action may be warranted 

The fight against fraud by insurers has always been cyclical. The Coalition and IASIU were started after insurance fraud was seen to be spiraling out of control in the late 1980s and early 1990s. It was during this same period that many insurers committed to creating and staffing SIUs to fight insurance fraud. However, early in the new millennium, budgets and staffing were again being scaled back. Then the onslaught of the Great Recession brought with it increased levels of insurance fraud. Historical analysis dating back more than a century unquestionably demonstrates all forms of fraud increase in times of economic hardship. Once again, insurers started to become more aggressive in their anti-fraud efforts, including the start of large-scale “recovery actions” to seek monies back from those who had committed large-scale schemes to defraud insurers.  

Today’s world is riper for insurance fraud than at any time in history. Three recent Coalition research studies dramatically show why insurance carriers across all lines of insurance should focus more, and certainly not less, on fighting insurance fraud. In 2021, the Coalition released the first update to the “Economic Impact of Insurance Fraud in America” study since 1995. This was the most comprehensive study ever undertaken of the cost of insurance fraud. A consortium of anti-fraud leaders, insurers, academics, and government agencies all participated in developing or providing data for this study. The resulting annual $308.6 billion figure should be enough to gain anyone’s immediate attention.  


Six months later, the Coalition released its long-awaited study on the “Ethical Use of Data to Fight Insurance Fraud.” For years, we told legislators and regulators American consumers would support the proper use of their personal data by insurers to help protect them from insurance fraud. The response was, “Prove it,” and we did. An overwhelming 83% of consumers responded that they supported insurers using tools such artificial intelligence (AI), algorithms, and machine learning to identify insurance fraud and those committing insurance crimes. There is no question data is the key to not only fighting insurance fraud in the future, but also how insurance transactions overall will occur. Insurers have a unique opportunity to gain consumer trust through their proper use of data to fight insurance fraud.  


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In 2022 the most shocking study of all was released, “Who Me? Who Commits Insurance Fraud and Why” (released by the Coalition and Verisk). Never had this type of detailed psychological analysis of insurance fraud been undertaken. The results show an overwhelming number of Americans under the age of 45 not only find insurance fraud acceptable, but also are envious of those who commit fraud and are more than willing to commit insurance fraud if given the opportunity.  

Combined, these studies demonstrate the importance of both fighting fraud and gaining the support of consumers to do so. Oddly, however, the trend by many insurers now appears to be to cut anti-fraud efforts or outsource many of those functions. There is nothing improper about outsourcing professional services as part of an anti-fraud program. Many great companies provide outstanding services. Many of those providers, however, are now saying the pendulum may have swung too far. How an SIU is structured is not nearly as important as the insurer putting into place a strong anti-fraud program and making certain it has the human, data, and financial resources required for success.  

Insurance fraud, and the fight against it, has changed dramatically over the course of my career. While I look forward to staying involved with programs such as the newly formed Global Insurance Fraud Summit, and providing expert witness and consulting services, the time is now to pass the torch to a new generation of anti-fraud leaders. The challenges are many, but the talent, skills, innovations, and opportunities to fight insurance fraud have never been better.

About The Authors
Matthew J. Smith

Matthew J. Smith, Esq. is the executive director of the Coalition Against Insurance Fraud based in Washington, D.C.

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CLM’s Insurance Fraud Committee identifies, analyzes, and offers education on emerging fraud schemes and tactics; monitors and reports on developments in case law, state fraud statutes and applicable regulations; collaborates with other anti-fraud industry organizations and associations; and seeks to provide amicus support in matters of importance in the fight against insurance fraud.

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