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Get the inside scoop on insurance fraud

June 16, 2014

Learn the ins and outs of insurance fraud from expert Loretta Worters.

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Insurance fraud affects nearly every segment of our economy and society. Across the U.S., businesses lose millions in revenue each year because fraud increases employee health coverage expenses and business insurance costs, according to Zurich.

Get the inside scoop on insurance fraud and how to avoid it from an expert in the industry. Check out what Loretta Worters, Vice President of Communications for the Insurance Information Institute, has to say about it.

1) What is the most common form of insurance fraud across the United States?

The top five types of questionable insurance claims are:

  • Personal automobile, with 78,024 claims in 2012, up 13 percent from 2011.
  • Home-owners personal property, with 17,183 questionable claims, up 45 percent.
  • Workers compensation questionable claims totaled 4,459 in 2012, up 29% from a year ago.
  • Commercial automobile questionable claims totaled 3,554 in 2012, up 15 percent from 2011.
  • Commercial and general liability saw 2,650 questionable claims in 2012, up 3 percent from 2011.

2) How does insurance fraud affect insurance companies?

It affects them in that these losses must be passed on to consumers. Almost half (45 percent) of 143 U.S. insurers surveyed by the Property Casualty Insurers Association of America and FICO (a predictive analytics provider) said that fraud accounts for 5 to 10 percent of their claims costs. However, almost one-third of respondent insurance companies (32 percent) in the August 2012 survey said that fraud was as high as 20 percent.

3) How does insurance fraud affect other businesses?

Insurance fraud does affect other businesses. The increase in insurance rates is passed down to consumers who have to pay more for goods and services. Prices of goods at your department or grocery store keep rising when businesses pass higher costs of insurance onto customers.

4) How is insurance fraud being prevented now?

Increased crackdowns in the 1990's uncovered far more insurance fraud than anyone realized existed. To give prosecutors better legal tools to convict crooks, the Coalition Against Insurance Fraud developed a tough model state fraud law. Some 15 states have adopted or strengthened their insurance fraud laws based on the Coalition’s model. Among other provisions, this model creates state fraud bureaus that help hunt down fraud artists and build strong cases against them. Many fraud bureaus even have power to subpoena and fine crooks.

5) What do you think is the most important, but lesser-known, fact about insurance fraud?

The Internet will hatch new insurance swindles as computer-savvy consumers buy from online insurance companies that may be virtually untraceable. The elderly will remain one of the largest targets of insurance swindles. Investment schemes are among the newest approaches: Thousands of seniors are investing in bogus viaticals — life insurance policies that don’t exist or were obtained illegally. Many seniors also are investing in fake promissory notes sold by insurance agents and guaranteed by non-existent insurance companies. So we need to be more vigilant to crack down on these latest trends.

The information in this publication was compiled from sources believed to be reliable for informational purposes only. All sample policies and procedures herein should serve as a guideline, which you can use to create your own policies and procedures. We trust that you will customize these samples to reflect your own operations and believe that these samples may serve as a helpful platform for this endeavor. Any and all information contained herein is not intended to constitute advice (particularly not legal advice). Accordingly, persons requiring advice should consult independent advisors when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein. We undertake no obligation to publicly update or revise any of this information, whether to reflect new information, future developments, events or circumstances or otherwise. Moreover, Zurich reminds you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional procedures might not be appropriate under the circumstances. The subject matter of this publication is not tied to any specific insurance product nor will adopting these policies and procedures ensure coverage under any insurance policy.

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