Sign InInsurance Fraud Prevention: How 3D Documentation Protects Insurers and Policyholders
Property and casualty insurance fraud costs the industry over $45 billion annually, forcing insurers to allocate countless resources to detection and investigation, and driving up premiums for honest policyholders.
The challenge for insurers lies not just in identifying fraudulent activities, but in developing strategies to combat them before they impact the bottom line. Traditional approaches largely focus on detection after the fact—analyzing claim patterns, conducting investigations, and pursuing legal action against perpetrators.
While detection remains crucial, the most effective fraud prevention strategies don't just catch dishonesty—they make it significantly harder to commit fraud in the first place. By examining technological solutions and process improvements, this article provides key strategies that prevent insurance fraud, protect honest policyholders, and maintain efficient claims processing for legitimate cases.
The rising cost of insurance fraud
Insurance fraud takes many forms, from opportunistic exaggeration to completely fabricated incidents. The most common types of property and casualty fraud include:
Inflated damage claims: Policyholders exaggerate the extent or cost of legitimate damage, often inflating repair estimates or claiming pre-existing damage was caused by a covered event.
Staged incidents: Deliberately causing damage to property and then filing claims, such as intentionally flooding basements or staging break-ins.
Premium fraud: Providing false information during policy applications to secure lower premiums, such as misrepresenting property location, usage, or risk factors.
Contractor fraud: Unscrupulous contractors who inflate repair costs, perform unnecessary work, or bill for services never rendered, often targeting homeowners after natural disasters.
False documentation: Submitting fabricated receipts, repair estimates, or photographs to support fraudulent claims.
Buildup claims: Adding illegitimate items or damages to otherwise legitimate claims to increase payout amounts.
Fraudulent activities create costs that ripple far beyond the initial false claim. They impose a significant operational burden on insurers, who must allocate resources to investigation, legal proceedings, and specialized fraud detection systems.
For honest policyholders, the consequences are equally serious. Fraudulent claims drive up premiums for all policyholders, as insurers spread the cost of fraud across their entire customer base. The FBI estimates that fraud costs the average American family between $400 and $700 annually in increased premiums. Additionally, fraud can lead to longer processing times for legitimate claims as insurers implement more stringent review procedures.
4 best practices for insurance fraud prevention
Traditional fraud monitoring methods leave critical gaps that fraudsters exploit. Static photographs are selective and can be manipulated, written reports are subjective, and paper-based processes lack transparency. These limitations create opportunities for misrepresentation and make it challenging to establish definitive proof when investigating suspicious claims. As fraudulent schemes become increasingly sophisticated, obtaining complete and objective evidence has never been more crucial.
Digital twin technology addresses these challenges by creating comprehensive 3D property models that provide complete spatial context, tamper-proof documentation, and shared objective records. The following insurance fraud prevention strategies capitalize on these features to gather more secure, verifiable evidence, and reduce subjectivity.
1. Standardize documentation at every stage
Inconsistent documentation is a fraudster's best friend. When every property assessment must follow the same standards, it becomes much harder to hide discrepancies or justify inconsistent damage interpretations.
Initial property evaluation
Establish baseline pre-loss records. Advanced visual documentation solutions like Matterport’s 3D scanning for insurance capture complete spatial context and provide an objective reference point for any future claims.
First notice of loss (FNOL) documentation
Require loss records to be captured immediately following an incident, before cleanup crews arrive or temporary repairs begin. Complete documentation should show not just the damage, but the context around it as well.
Assessment
Replace manual estimates with precise digital measurements. Inflated quotes become obvious when repair calculations are based on exact square footage and linear measurements rather than rough estimates.
Documentation checklist
Implement pre-loss documentation protocols such as routine scanning for high-value properties, commercial spaces, and locations in high-risk areas
Add detailed annotations with condition notes, highlight existing wear or damage, and mark important features that might be relevant to future claims
Adopt uniform post-incident procedures that require immediate and full spatial context for first notice of loss (FNOL) documentation
Create standardized measurement protocols using digital measurements rather than manual estimates for all damage assessments
Establish chain of custody procedures that document when, where, and by whom each piece of evidence was captured. Time-stamped, GPS-tagged 3D models provide unbreakable chains of custody that hold up in legal proceedings
Require multi-angle documentation that shows the entire context rather than isolated damage areas
2. Strategically identify fraudulent activity
Early detection is one of the more cost-effective approaches to fraud prevention. Rather than waiting for red flags to surface during routine claim reviews, proactive identification techniques help investigators spot inconsistencies before fraudulent claims are paid out.
Look for visual inconsistencies – Compare damage patterns against the reported cause of loss. Irregularities include:
Multiple points of origin where fire, water, or impact damage starts in several unconnected locations.
Illogical progression of damage that doesn't follow natural physics (gravity, fire spread, collision dynamics).
Selective targeting for only high-value or easily replaceable items while the surroundings remain untouched.
Tool marks or staging evidence that show signs of prying, cutting, or other deliberate actions rather than accident forces.
When investigators can examine scenes from every angle through a virtual walkthrough (rather than selective photographs), inconsistencies become much more apparent.
Randy D’Arcy of Envista Forensics, was able to spot a subtle inconsistency in a burglary claim following an unrelated fire investigation.
"We scanned the entire house, the insured called to report a separate claim of a burglary to the property with a personal property missing. They reported 100 pairs of Nike shoes missing… We were able to pull up the Matterport and show that not only were there not shoes in the closet, but the soap deposition on the carpet was even throughout the entire closet indicating that there were no boxes in the closet."
This evidence provided by D’Arcy’s scans allowed Envista to deny the fraudulent claim of theft.
“It’s not so much the origin and cause, it’s the entire package that we’re able to offer our clients of the documentation of their loss.”
See how Envista Forensics uses digital twins to enable remote inspections, boost collaboration, and speed up claims processing. Watch the webinar →
Analyze damage-to-cost ratios: When repair estimates seem disproportionate, cross-reference quotes with actual visible damage. Precise measurements and area calculations from digital floor plans and 3D models can verify the actual scope of work needed and expose inflated estimates. Investigate any red flags, such as:
Estimates that include work in areas showing no visible damage
Material quantities that exceed what measurements support
Labor hours that seem excessive for the documented scope
"Standard" charges that don't match the specific property conditions
Track claim evolution: Monitor how damage descriptions change over time by comparing initial reports with follow-up documentation. Legitimate claims remain consistent, while fraudulent ones often expand or shift as claimants test what they can get away with.
3. Improve stakeholder transparency
When everyone involved in a claim has access to the same information, fraud opportunities diminish significantly. Transparency doesn't just build trust—it creates accountability that makes fraudulent schemes much harder to execute.
A digital twin replaces typically scattered evidence with one source of truth that all parties can access. Selective presentation of evidence is impossible when adjusters, contractors, policyholders, and legal representatives are referencing exactly the same documentation.
When contractors submit estimates, they can reference specific areas in the shared record. When policyholders have questions, they can point to exact locations. When legal teams need evidence, they're working from the same unalterable source that everyone else has seen.
4. Invest in investigator and adjustor training
Scenario-based training programs dramatically improve fraud detection skills without sacrificing significant time and expenses to training. Use real fraud cases converted into virtual training environments.
Instead of classroom discussions about theoretical fraud patterns, investigators can practice identifying damage patterns that don't align with reported causes, staged incidents, and inconsistencies between different areas of the same property. Hands-on training makes it much easier to recognize subtle indicators that might be missed in traditional formats.
Virtual training environments also allow adjusters to conduct thorough evaluations without the time and expense of physical site visits. This is particularly valuable for catastrophe response teams and independent adjusters who need to process high volumes of claims efficiently. Training programs that once required expensive mock-up scenarios or field trips to damaged properties can now be delivered remotely, reducing training costs while providing more realistic and diverse case studies for staff development.
The psychology of insurance fraud
Not all insurance fraud is committed by career criminals running sophisticated schemes. Much of it comes from ordinary people facing financial pressure who convince themselves that a small exaggeration or omission won't hurt anyone. Understanding the opportunistic fraud phenomenon reveals that the most effective deterrents don’t just focus on catching bad actors. They aim to change the psychological environment that makes fraud seem acceptable or easy.
Research shows that people are more likely to commit fraud when three conditions align: financial pressure, opportunity, and rationalization. Fraud prevention strategies often focus heavily on the first two factors—with thorough claims review protocols, credit reports and application screening—but few approaches target the third. Removing the opportunity for people to rationalize their dishonest behavior (telling themselves "everyone does it" or "the insurance company will never notice") makes fraud more challenging to commit.
Deterring opportunistic fraudsters with “the surveillance camera effect”
People behave more honestly when they believe their actions are being observed or recorded, even if no human is actually watching in real time. Just as visible security cameras reduce shoplifting regardless of whether they are actively monitored, visual documentation creates a psychological barrier that deters fraudulent impulses.
Most opportunistic fraud relies on ambiguity. People exaggerate damage when they believe their version of events can't be definitively challenged. But when full spatial context is captured, rather than isolated damage alone, the opportunity for "creative interpretation" disappears.
This deterrent effect works even when people don't fully understand the technology involved. The mere knowledge that substantial and indisputable records exist creates what behavioral economists call "enhanced accountability."
Empowering the honest majority
While much attention focuses on deterring fraud, equally important is reassuring the vast majority of honest policyholders that they will be treated fairly. When people trust that their claims will be evaluated objectively and thoroughly, it strengthens their relationship with their insurer and reduces the likelihood that they'll be tempted by opportunistic fraud in the future.
Honest policyholders appreciate the transparency of shared visual documentation because it demonstrates that their claims are being evaluated properly. They can see exactly what the adjuster is looking at, understand how decisions are being made, and feel confident that legitimate damage won't be overlooked or undervalued.
The psychological impact extends beyond individual claims. Insurers that demonstrate consistent commitment to full and objective evaluation build brand and industry credibility and reduce the cultural acceptance of "small" fraudulent acts that can escalate over time.
Insurance fraud prevention tips
Vet contractors and third-party vendors: Confirm licensing, credentials, and prior claim history before authorizing work or payment.
Leverage digital documentation: Create detailed, time-stamped records of property condition in the form of digital twins for pre-loss underwriting, post-loss comparisons, and dispute resolution.
Require complete, signed documentation: Never accept blank or incomplete forms; ensure all claim submissions are fully detailed and signed.
Cross-reference itemized invoices: Compare vendor estimates and repair bills against the original property condition using captured 3D walkthroughs.
Audit for inconsistencies: Routinely review EOBs, receipts, and claim details for red flags like inflated damages or duplicate charges.
Report and track suspicious claims: Flag potential fraud early and coordinate with your SIU (Special Investigations Unit) or local authorities as needed.
