Calculating the ROI of private investigations

In the business world, calculating ROI is a pretty standard procedure. Business owners and leaders want to know that the investment they’re making, whether of time or money, is worth it. They want to see the return and ensure they’re not wasting money.

But how exactly do you calculate ROI on private investigations? Whether your company is investigating suspected workers’ compensation fraud or investigating a divorce case, there can be a lot of time and money invested in the course of an investigation.

All too often, we see companies try to measure the ROI of investigations as an outcome-based ratio rather than a true ROI. They look at the number of investigations with a positive outcome or valuable evidence compared to the total number of investigations ordered. Basically, they’re looking at a win rate. Out of 20 investigations, how many ended with successful evidence?

That’s not an accurate or fair measure though, because private investigations have a lot of unknowns. What if the person they’re running surveillance on doesn’t even leave their house for three days? What if they do leave, but every single time it’s on crutches with someone else to drive them wherever they’re going? There’s both skill and luck involved in private investigations, and the ultimate goal is finding the truth.

The better measure of ROI is to truly look at the numbers. What payouts did the insurance company not have to make due to evidence discovered during the investigation? What settlement did the law firm’s client receive (and what percentage did the law firm earn from that) due to the investigation? How does that money saved or earned compare to the total cost for all investigations ordered that year?

When you look at the numbers that way, the ROI on investigations becomes pretty clear because the cost of one investigation compared to the cost of an avoided claim payout is so dramatically different. One investigation where evidence of insurance fraud is found could potentially save a company hundreds of thousands of dollars!

If your company is calculating ROI for investigations, be sure you’re looking at the actual numbers for the investment and the return and not just a win rate on cases.

Learn how a vendor management platform can help you improve your ROI on investigated claims.