Fraud Detection Rate
Percentage of claims identified as potentially fraudulent and referred for investigation
What is Fraud Detection Rate?
Fraud detection rate is the percentage of insurance claims flagged as potential fraud. It shows how effectively an insurer identifies suspicious claims for further investigation.
Insurance fraud raises costs for honest customers, so detection matters, but flagged claims must be handled fairly and not all will be fraudulent.
How this KPI is measured
- Function
- Legal, Risk & Compliance
- Sub-function
- Fraud Management
- Industry
- Insurance
- Type
- Leading
- Impact
- Risk
- Unit
- %
- Measurement frequency
- Monthly
- Formula
- (Claims flagged as potential fraud / Total claims received) × 100
How to calculate it
Divide claims flagged as potential fraud by total claims received, and multiply by 100.
For example, if 250 of 10,000 claims were flagged, the rate is 2.5%.
Track how many flagged claims are confirmed as fraud, since a high flag rate with few confirmations means wasted effort and delays for honest customers.
Where it is used
Managing fraud risk
Identify suspicious claims.
Tuning detection
Balance detection and false alarms.
Protecting honest customers
Keep premiums fair.
How to improve it
Tips and common mistakes
- A flag is a reason to check, not proof of fraud.
- Treat customers fairly and follow regulation.
- Measure confirmed fraud too.
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