Insurance fraud in the U.S. is estimated to cost 80 billion annually. In fact, insurance fraud accounts for 10% of the property / casualty insurance industry’s annual incurred losses and loss adjustment expenses. FBI statistics claim that healthcare fraud is an estimated 3% to 10% of total healthcare expenditure in the United States.
In the following infographic, discover how bad insurance fraud really is. And if you suspect insurance fraud and are in need of a professional insurance fraud investigator, contact us today.
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Insurance Fraud: How Bad is it Really?
Insurance Fraud Overview
- The annual cost of Insurance fraud in the USA is an estimated minimum of $80 billion.
- Fraud accounts for 10% of the property / casualty insurance industry’s annual incurred losses and loss adjustment expenses.
- The FBI says that healthcare fraud is an estimated 3% to 10% of total healthcare expenditure in the USA.
The insurance sectors that are perceived to be the most vulnerable to fraud are:
- Personal Property
- Workers Compensation
- Auto-Insurance
- Healthcare
Insurance Claims & Prevalence
The Institute of Medicine says that the US healthcare system wastes $75 billion a year on fraud.
- Fraud accounts for 5% to 10% of all claim costs for US and Canadian insurers.
- 32% of insurers say fraud is as high as 20% of claim costs.
- 57% of insurers predict an increase in personal property fraud policyholders.
- 61% of insurers predict an increase in auto insurance fraud by organized rings.
- 69% of insurers predict a rise in workers compensation scams.
Public Attitudes to Insurance Fraud
- More than 1 in 2 people think it is more likely that an insurer’s poor service will cause a person to commit insurance fraud.
- More than 3 in 4 people think that people are more likely to commit insurance fraud during a recession.
- More than 4 in 5 people think it is unethical to misrepresent facts on an insurance application in order to lower their premiums.
- Only 1 in 5 people who say they know about a fraud report the crime.
Types of Insurance Fraud
Automotive
- 21% of bodily-injury claims & 18% of personal injury protection claims that close with payment have the appearance of fraud or build-up.
- Build-up involves inflating otherwise legitimate claims.
- This is the most common abuse.
Arson
- Insurance fraud is suspected in 8% of intentional fires.
- The bedroom is the most common area of origin for intentional home fires.
- Arson is now in decline, but it caused $1.3 billion in direct property damages in the US annually between 2007 & 2011.
Workers Compensation
- More than 1 in 10 small business owners are concerned an employee will fake an injury or illness to get workers compensation benefits.
- 1 in 5 feel unsure about how to identify workers compensation scams.
- It is not just employees contributing to fraud. 10% – 20% of businesses misclassify at least 1 worker as an ‘independent contractor’ to avoid paying full workers compensation premiums.
Medical Identity Theft
- Medical identity theft is when personal information is stolen aby criminals who lodge fraudulent claims against the victim’s health insurance policy.
- Incidents increased by almost 22% in 2014 & it takes 3 months on average for a victim to find out that it has happened to them.
- More than 3 in 5 victims pay an average of $13,500 to resolve the crime.
Anti-Fraud Technology in the Insurance Industry
- 1 in 3 insurers do not feel adequately protected against fraud.
- Yet 95% of insurers do use fraud technology, which is up by 7% compared to the year 2012.
- Just 4 out of 5 insurers (81%) use basic anti-fraud tools.
- These include automated red flags & business rules.
- Advanced anti-fraud tools are not as prevalent among insurers.
- These include link analysis (50%), predictive modeling and text mining (both at 43%).
- Over ½ of insurers (53%) cite a lack of IT resources as the main barrier for implementing advanced anti-fraud technology.
Key Takeaways
- The insurance industry attracts a high rate of fraud & certain lines of insurance are more susceptible than others.
- Insurers need to upgrade their basic anti-fraud tools, identify any IT resources needed as a result & implement advanced software.
- The public needs to be more vigilant in reporting insurance fraud if they become aware of it.