Insurance Fraud: Driving Up Premiums
Monday November 10, 2008
Insurance fraud is a serious concern to insurers and businesses that pay premiums. Fraud drives up premium costs.
Some quick statistics from the FBI:
- "The total cost of insurance fraud (non-health insurance) is estimated to be more than $40 billion per year. That means Insurance Fraud costs the average U.S. family between $400 and $700 per year in the form of increased premiums."
- During Hurricane Katrina, "of the $80 billion in government funding appropriated for reconstruction, it is estimated that Insurance Fraud may have accounted for as much as $6 billion."
Still I am fascinated by the stories of the criminals that do get caught in these scams. I am assembling a set of the best fraud stories of 2008. I will list a few here that have not made it to my list, but are classic stupid criminal stories:
- In my neck of the woods, from Brecksville, Ohio, comes the story of the guy who claimed total disability after an on-the-job injury. He started collecting workers' compensation. He took on a side job (hard to do when disabled). The side job? Delivering phone books. One delivery was to a local comp. office...where he was caught on tape lifting, bending and delivering phone books. He later plead guilty to workers' compensation fraud.
- A Mississippi woman decided to take her car to the shore. Why was this strange? Hurricane Gustav was rolling in. She parked it at the beach and hopped into an accomplice's vehicle. News cameras caught the action.
- Business owners know their greatest asset is their human capital. But two New York businessmen, decided that their employees were merely "materials." Each month, 30 employees were paid and the checks listed as paying for "materials." In this way, they avoided nearly $800,000 of of workers' compensation premiums by claiming a lower payroll.
- In California, a repair-shop owner and his girlfriend agreed to make a stolen vehicle claim for her vehicle. He would hide the vehicle in his shop. She called the police and made the claim. A few months later, the shop owner had a minor break-in. He called police. They came - the same officers who had taken the stolen vehicle report - and found the "stolen" vehicle parked right in the shop in plain view.
Comments
I have always wondered whether the estimates of fraud are fraudulent themselves. Have you?
I have never found any backup for the statistics nor an explanation for how they are determined. Have you ever considered that the insurance industry and those in the business of making money from preventing insurance fraud make up these statistics out of propaganda and self interest?
If those statistics are correct, it is amazing that the insurance product corrupts so many otherwise innocent people. My personal suspicion is that the figures are made up and repeated by the insurance companies and spokespersons for the insurance industry for propaganda purposes.
Unfortunately, the insurance stats are actually under estimated. There is not one agency that collects all the information regarding fraudualant claim.
I am a fraun investigator for an insurance company. I have had insureds drop their claims because I ahve proved they are lying. Unfortunately, these people are not prosecuted.
Additionally, when some one purchases an insurance policy and lies about where they live or who will be driving the car, this is insurance fraud. Along with reporting a claim that someone hit and ran your vehicle, when, in actuality, you backed into a pole, this is insurance fraud.
There are a number of other things I can go into but do not have the time. But, please be sure, insurance fraud is real and effecting our insurance rates.
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