Insurers face more frequent challenges in handling catastrophic (CAT) claims from catastrophic storms and events. Due to the effects of climate change, the predictability of seasonal weather patterns and subsequent storms is increasingly unstable. Insurers in nearly every state are realizing losses from hurricanes, and convective storms.

Catastrophic Claims – An Increasing Challenge for Insurers 

According to the National Centers for Environment Information, in 2023 (as of September 11th), 23 confirmed weather/climate disaster events with losses exceeding $1 billion each affected the United States.

As the number, size, and frequency of the events continue to grow, CAT claims, and the resulting risk to insurers, also grows. 

In this article, we take a deeper look at the areas of risk that arise during CAT claims, and how investments in mitigation technology and strategies can minimize the impact.

Industry exposure to risk in CAT claims

Large scale catastrophic events provide fertile ground for opportunistic fraud.  Individuals and families under financial pressure may see the storm as an opportunity to get out of strained financial commitments, or take advantage of incidental damage to inflate a claim to have additional work done. Contractor-initiated fraud can also be a real problem, showing up in similarly inflated appraisals, and more.

Providing false or misleading information

Soft fraud is a real risk with CAT claims. The expectation is that it is more likely the fraud won’t be caught given the number of claims an insurer will be processing. A greater portion of customers than normal may exaggerate the extent of the damage to their property, or even attempt to file false CAT claims altogether. 

Most commonly, customers may inflate the value of items or submit claims for additional items that haven’t been lost, damaged, or stolen. Padding a flooded kitchen claim by ‘needing to replace’ top cabinetry, or replacing undamaged electronics are very common examples of the small fraud that can easily get passed through burdened processes.

Hail storms also bring with them hundreds of fraudulent claims to insurance providers. While spotting real hail damage fraud from simulated hail storm damage is fairly uncomplicated, it does require trust in the body shop and an appraiser visit – which adds time and costs to claims completion.

Pre-existing damage

Assuming there are no exclusions for pre-existing damage in a homeowners policy, identifying pre-existing damage becomes particularly challenging for hurricanes, as the storm’s force can magnify existing issues and make it difficult to distinguish between pre-existing and storm-induced damage. 

While GIS tools, satellite imagery, photo databases, and other tools can certainly help spot flagrant fraud on external home conditions, uncovering interior pre-existing damage conditions isn’t as simple. Disputes on pre-existing damages between homeowners and insurance companies complicate the claims process, and lead to customer dissatisfaction with legitimate claim payouts.

Movement of content on/off property before the storm

When events have a warning before they hit, some homeowners may see opportunity.  Some may remove their belongings from a property to a safe location, and submit a claim for expensive items like jewelry and electronics, claiming them to be destroyed or missing. Individuals who are underwater on automobile or recreational vehicle loans, for example, have even been found to intentionally move vehicles into harm’s way of rising flood waters in hopes of ridding themselves of the asset, or for monetary gain.

How These Areas of CAT Claim Risk Affect Insurers 

Processing catastrophic events claims place insurers in a challenging situation when managing customer expectations. Tensions are high, policyholders are stressed and looking for help, and insurers are facing an immediate increase in claims volume.  Amidst these claims is fraud, and the financial cost of that is passed on to policyholders as higher premiums. As a result, both insurers and policyholders are negatively impacted by insurance fraud.

In addition, insurers face challenges with resource constraints, customer retention, and higher loss ratios.

Strain on resources

Even if insurers have dedicated CAT insurance teams, they can still be overwhelmed by volume. And for those that don’t, typical staffing models may mean CAT events are handled inconsistently, whether it be newer, less-experienced adjusters handling CAT claims; outsourcing claim overflow; or non-optimized call routing. This can not only impact an adjuster’s ability to serve legitimate customers, but also negatively affect the customer experience at a critical time.


It’s no secret that customers with legitimate claims who become dissatisfied with the claim process during an event will very quickly become a policy renewal risk. Fraudulent insurance claims can have a negative impact on an insurance company’s customer retention for several reasons:

Increased premiums

Insurers may raise premiums for all policyholders to cover financial losses from fraudulent claims. This can lead to higher costs for policyholders, making insurance less affordable and potentially prompting them to seek more competitive rates with other insurers.

Reputation damage

Not processing and resolving legitimate claims in a timely manner can put an insurer’s reputation and credibility at risk. This can affect the company’s ability to attract and retain customers.

Loss Ratios

According to Fitch Ratings, the 15-point increase in the homeowner’s loss ratio to 82% is tied to higher catastrophe losses.

The surge in CAT claims in 2023 has increased the loss ratios for insurers in 2023 due to:

  • Increased claims expenses that include fraudulent claims 
  • Higher claim reserves as insurers set aside additional funds to cover potential legal and investigative costs
  • Unearned premiums for policies that were found to be fraudulent

Regulatory Scrutiny

If insurers are found to have inadequate anti-fraud measures, or take an excessive amount of time processing CAT claims, they may face regulatory penalties. The effects of regulatory scrutiny on insurers may include increased oversight of the claims-handling process, consumer complaints, compliance with state laws and regulations, and rate reviews.

How can insurers prepare for disaster fraud?

We have identified four steps insurers can take to prepare for disaster fraud and minimize the financial impact of catastrophic events and the associated CAT claims.

Invest in mitigation technology and strategies

The first step for insurers to save capacity, increase customer retention, and improve their loss ratios is to invest in new mitigation technology and strategies. According to a February 2023 McKinsey & Company Global Insurance Report, mitigation and prevention solutions can help clients become more resilient to these natural catastrophic risks.

Insurers are using new technology such as behavioral analytics, IoT, blockchain, and voice analytics to detect and prevent insurance fraud more effectively.

Deter fraudulent claims early

Insurers typically try to mitigate fraudulent claims by requiring that policyholders submit supporting documentation for their claims, such as receipts or photographs. In addition to this step, voice analytics can be introduced to deter opportunistic fraud as a claim is submitted.

Learn more about leveraging voice analytics in the CAT claims process

Fast-track low-risk claims 

The property damage from catastrophic events significantly disrupts the day-to-day routine of customers. As a result, they expect a lightning-fast response from insurance service providers to process their CAT claim so they can get back to normal.

During a catastrophic event, making it easy to communicate with customers to assess the severity of their losses and determine if their claims can be fast-tracked is critical. By asking customers a few simple questions, voice analytics can help insurers quickly triage low-risk claims from high-risk claims. 

Increase the number of immediate payments

Customers are concerned about whether their CAT claims will be covered and how quickly they will be paid so they can begin repairs. Immediate payments are necessary for insurers processing CAT claims for victims.

Fast, accurate, and immediate payments should be implemented to determine coverage, expedite repairs, and cover losses.

Better identify risk in CAT claims with voice analytics technology

Spotting fraud at FNOL is very challenging for the handlers.Unfortunately, that means fraud will sometimes be missed. Claims handlers deserve the best tools and assistance they can get to quickly separate low and high fraud risk claims.

By automating high volume, low risk claims using Clearspeed voice analytics, catastrophe response teams can spot fraud faster and more accurately, giving handlers the confidence to clear the low risk claims quickly, and route those with risk indicators for follow-up more efficiently.

Learn how Clearspeed Surge can help your organization get the right claims into the right hands faster, and with greater confidence.