Insurance fraud isn't a victimless crime. It costs everyone, from individuals and families to large businesses, hundreds of billions of dollars collectively each year. The Coalition Against Insurance Fraud indicates that fraud costs businesses and consumers $308.6 billion a year.

Additionally, the FBI estimates fraud costs the average family between $400 and $700 a year in premiums.

With that much money lost each year, it's not surprising that insurance companies have invested in technology to help identify fraud, or even stop it before it happens. As many as 96% of insurers use technology to detect fraudulent claims, according to “The State of Insurance Fraud Technology Study" published by the Coalition Against Insurance Fraud.

Filing an insurance claim is the point when a policyholder stands to gain the most from bad behavior—like overstating bodily harm or property damage, or pocketing the payment that was intended to repair or replace the insured property.

Here are some of the top ways the insurance industry uses technology to fight fraud:

Predictive analytics. Insurance carriers collect a lot of data on their policyholders and claims. With today's technology, they can put historical data to use and recognize patterns that indicate fraud. Predictive analytics includes machine learning algorithms and statistical modeling to flag claims that meet recognized patterns based on confirmed fraud cases, claims with unusual activity and patterns, or outliers that haven't been seen before and need to be reviewed by an expert.

Social network and behavior analysis. Almost everything you do leaves an electronic footprint, and insurers can use technology to identify patterns of behavior that don't line up with a claim. The most obvious example is someone who claims to be severely injured in a car accident and seeks compensation for medical expenses and lost wages but then goes on an expensive vacation and posts pictures of themselves scuba diving and surfing.

In the past, uncovering this type of fraud relied on expensive private investigators. However, modern technology allows insurers to scan social media and other publicly available data sources to flag cases where reality doesn't line up with a claim.

Identifying application gaming. A consumer tries to get a car insurance quote online. They put in all their information online, including the names and ages of all drivers, where the vehicle will be stored, and how many miles it's driven each year. The quote comes back and it's way too high! They start making adjustments. They remove a younger driver; change the ZIP code and reduce the annual miles driven.

This type of application “gaming" may have worked in the past, but modern technology makes it less likely to succeed. Thanks to artificial intelligence and machine learning, insurers can spot patterns that show someone may be trying to game the application.

Text mining. An insurance agent, broker or insurance carrier employee creates a lot of unstructured data in the course of their daily job. This includes emails, video calls, notes on their desktop, or even sticky notes. While technology may not be able to sweep the contents of handwritten post-its, it can look at just about everything else.

Text mining uses AI to comb through massive amounts of what might seem like meaningless communication and pull out themes and patterns that can indicate fraud. 

Ellen Lichtenstein is senior content specialist at AgentSync.