Reducing Service Provider and Warranty Fraud

The Challenge

Warranty fraud is a crime committed when a person or organization intentionally deceives a company or its partners to receive service, hardware, or financial compensation under the guise of a warranty claim. Warranty fraud directly impacts profits and the public perception of companies and their service partners. The client, an industry-leading computer technology provider, estimated that they were losing $100 million per year to warranty fraud and ineligible claims and wanted to reduce or eliminate fraudulent activity among its service provider base to realize significant cost savings and recover warranty expenses.

The Solution

With sponsorship from the executive board to tackle warranty fraud company-wide, the client contracted with Elder Research to help build the Global Analytics team, the internal fraud investigations group, and to develop an automated fraud detection solution. The fraud detection system combined internal and external data that had never been used together before to generate suspicion scores for each service provider. These tools also identified service technicians and companies that had abnormal rates of returning serviced components that were not faulty or used unusually high number of parts. More than 20 parts per case was determined to be particularly unusual and indicative of fraud.


The solution enabled analysts to prioritize workload by investigating the most likely and severe examples of fraud first, maximizing resource utilization, minimizing loss to fraud, and providing the detailed claims data required to facilitate investigation by corporate security and the compliance teams. In the first nine months the models uncovered $11 million in service provider contract fraud. Over a five-year engagement, the fraud detection system was credited with saving over $67 million in service provider and warranty fraud.

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