Insurance fraud is an age old problem and has been an issue since the inception of insurance policies in the eighteenth century. Insurance fraud is any act committed with the intent to obtain a fraudulent outcome from an insurance process. Fraud can occur when a claimant tries to gain a benefit or advantage to which they are not entitled, or when an insurer knowingly denies a benefit that is due. Both insurer and insured fraud are actionable in court. According to the Coalition Against Insurance Fraud, up to $96 billion is stolen each year through insurance fraud schemes, a number which could be much higher as no one knows how many fraud schemes are successfully executed without raising suspicion.

As fraudsters develop new creative ways to cheat insurers out of claim payouts, insurers have to re-evaluate their methods of fraud detection to decrease the amount of money paid out for falsified or padded claims. Over the past few years countless fraud attempts have been foiled by increasingly technological ways including security camera footage, personal social media sites, location check-in's, posted pictures, and Youtube videos. Since most adults use social media today, they often leave a trail of public information including what they think and say, what they have done, and who they are associating with which allows insurance companies to uncover discrepancies between the public story and the one they were told when a claim was filed.

The Internet of Things factors into this as the inter-network of physical devices such as wearables and smart home technology are embedded with software that allow the objects to collect, send and receive data. Millions of data points are being collected on a daily basis from devices ranging from fitness trackers to pacemakers, to home security, doorbell, climate control systems, and now even some appliances. Many everyday wearable objects are now being commissioned to track steps, breathing, distance traveled, calories burned, heart rate, diabetes risk, and sun exposure; by no means an exhaustive list. Smart home devices can allow the user to remotely open and close garage doors, adjust the thermostat, lock and unlock doors and windows, and monitor and interact with your refrigerator. This past year an ever increasing numbers of smart devices has uncovered some even more interesting means of fraud detection.

Just a few weeks ago an Ohio court determined that data gleaned from a pacemaker was admissible in what is believed to be the first case using data from a beating heart as evidence in an insurance fraud case. The fraudster stated that he was asleep when the fire started and that he awoke to his home in a blaze, and proceeded to pack some belongings in a suitcase and broke a window with a walking stick in order to throw the belongings out and escape through the window. Other reasons to suspect arson arose, and the police obtained a search warrant for the data from the cardiac pacing device. The cardiologist that reviewed the data deemed it “highly improbable” that the defendant could have collected, packed, and removed the number of items from the house, exited the bedroom window, and carry all of the objects to his car during the short period of time that his heart rate was recorded as elevated. The court in question determined that the pacemaker data was similar to a blood sample, and was no more private or unconstitutional than medical records, which police can obtain for use as evidence in criminal cases.

A case in Pennsylvania involving a woman who claimed she had been awoken and assaulted by an intruder ended up in criminal charges for the alleged victim since her fitness tracker, among other evidence, showed she had not slept at all that night thus she could not have been awakened by an intruder.

An Arkansas man was suspected of murdering a friend in 2015, and Amazon Echo in the home was cited as a possible “witness” to the crime. Although police did not get the evidence to prove murder from that smart device, the suspect's smart water heater indicated that an exorbitant amount of water was used in the wee-hours of the morning in what police believe was an attempt to cover up the murder.

On the other hand, some attorneys are using wearable technology to help prove that their clients didn't attempt to cheat their insurers. Lawyers are trying to accomplish this by using data gleaned via smartwatches and fitness trackers to show evidence of activity levels that are lower than those of other people in a similar position. This data can be indicative of a workers' compensation claimant who was actually injured on the job, and whose activity is hindered due to that injury.

The above decision, to allow in pacemaker evidence, is the first of its kind but follows a trend allowing social media content and smart device data to be discovered. This area of law is largely untested, and setting a legal precedent and constitutional privacy framework in direct response to smart technology will help to reassure consumers. From an insurer's standpoint, discovery demands must be narrowly tailored in order to produce relevant information and should be reasonably calculated to lead to the development of admissible evidence. As an insurer, if a fraudulent claim is made and evidence presented on social media proves the fraud, it is prudent to ensure that that evidence is admissible in court. That way, if the insurer is sued for denying a fraudulent claim there is admissible evidence that backs up the fact that the claim was indeed fraudulent.

The possibilities of using smart technology in insurance coverage cases is vast and growing. Smart cement can be used in place of regular cement and will be able to detect crumbling, cracking, warping, and stressing. In case of a collapse, insurance companies could prove that the state knew or should have known that the bridge was at risk of collapsing, thus cutting down paid-out claim costs. Smart ovens can warn homeowners if their oven is at risk of being engulfed in a fire. Smart locking systems and alarm systems can show insurers if a break-in occurred or if the homeowner is trying to cheat them out of a burglary claim payout. Fitness trackers can show if an insured homeowner was really out for a run while the house caught fire. Although accessing data collected from smart technology might not be practical when attempting to combat fraud from the initial stages of an investigation, and the sheer amount of collected information may make it difficult for law enforcement to sift through to the important parts, smart technology is a useful tool for insurers and insureds alike.