The Facts of Insurance Fraud: Chicago, IL

AUGUST 2013 Insurance Fraud

  • Property/casualty insurance fraud amounts to about $32 billion a year, according to industry estimates.
  • Questionable insurance claims rose by 16 percent from 100,201 in 2011 to 116,171 in 2012, according to the National Insurance Crime Bureau (NICB).
  • The NICB estimates that Hurricane Sandy generated about 250,500 claims for damaged vehicles, mostly damaged by flooding, with New York leading the way with 150,000 claims, followed by New Jersey (60,000 claims) and Connecticut (8,000).
  • The insurance industry is working hard to keep flood damaged vehicles off the road. This effort includes including VINCheck, a free service set up by the NICB to help consumers spot flooded vehicles that may be reconditioned and fraudulently put up for sale as undamaged following a flood disaster such as Hurricane Sandy.

Insurance industry estimates generally put fraud at about 10 percent of the property/casualty insurance industry’s incurred losses and loss adjustment expenses each year, although the figure can fluctuate based on line of business, economic conditions and other factors.[1] Using this measure, over the five-year period from 2007 to 2011, property/casualty fraud amounted to about $32 billion each year. Also, the Federal Bureau of Investigation said that healthcare fraud, both private and public, is an estimated 3 to 10 percent of total healthcare expenditures.[2] Based on U.S. Department of Health and Human Services’ Centers for Medicare and Medicaid Services’ data for 2010, healthcare fraud amounted to between $77 billion and $259 billion.

Fraud may be committed by different parties involved in insurance transactions: applicants for insurance, policyholders, third-party claimants and professionals who provide services and equipment to claimants. Common frauds include "padding," or inflating actual claims; misrepresenting facts on an insurance application; submitting claims for injuries or damage that never occurred, services never rendered or equipment never delivered; and "staging" accidents.

Forty-two states and the District of Columbia have set up fraud bureaus (some bureaus have limited powers, and some states have more than one bureau to address fraud in different lines of insurance). These agencies have reported increases in referrals (tips about suspected fraud), cases opened, convictions and court-ordered restitution.

Healthcare, workers compensation and auto insurance are believed to be the lines most vulnerable to insurance fraud. But the nature of fraud is constantly evolving. Shortly after the enactment of the 2010 healthcare reform law, the Health and Human Services secretary issued warnings about a proliferation of phony health insurance policies.

 

For any concerns about the risk of fraud, feel free to contact one of our customer service representatives. Our knowledgable staff will be happy to answer any questions regarding insurance.

 

-Lucas R. Zeiler

(708) 597-5900

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