According to the FBI, the total cost of insurance fraud in the United States, excluding health insurance fraud, is $40 billion annually. The typical family pays $400 – $700 more in premiums as a direct result of this fraud. Sure, $700 is not small change, but is it worth being concerned about? Taken on it’s own, maybe, maybe not, but considering the broad personal and societal impacts, insurance fraud is a subject worth focusing on.
Insurance fraud comes in many forms including false or inflated claims in workers compensation and disability cases, accidents, property losses, and personal injury, among other types. Besides increased premiums, insurance fraud results in added expenses and resource usage that impact governments, taxpayers, businesses and individuals, including a) law enforcement fraud investigation units, b) liability defense costs, c) productivity losses, d) prosecution costs, e) burdens on the court system, f) government recordkeeping requirements. When taken as a whole, insurance fraud impacts more than just our insurance premiums.
Now that we care, what can be done?
While insurance fraud continues to be a problem of large magnitude, there are things that can be done to reduce the incidence and impact of fraud.
- Educate the public. According to the Coalition Against Insurance Fraud, 24% of people think it’s okay to pad an insurance claim to make up for premiums paid. Understanding what constitutes fraud and the negative consequences of such actions could reduce the propensity of people to commit fraud. A public outreach campaign in Pennsylvania from the state’s anti-fraud agency was able to decrease the number of people willing to commit fraud by 73% as measured by surveys before and during the campaign.
- Use fraud detection technology. Predictive modeling and link analysis can help detect fraudulent claims or at least flag claims with a high probability of fraud before claims are paid. Based on pattern recognition and key factors present in a volume of fraud cases, e.g., absence of a police report, these technologies can focus resources on claims that need investigation.
- Investigate claims. Using advanced surveillance and investigation techniques can root out false and inflated claims resulting in faster case adjudication and lower settlement payments. Having a thorough investigative process that includes a comprehensive witness interview process, plaintiff social media and claims history, and in some cases high tech surveillance, can also have a halo effect by deterring future false claimants.
Insurance fraud continues to be a growing burden on the U.S. economy, but education, technology, and investigative diligence can provide some relief.