Nearly one in four U.S. adults say that overstating the value of claims to insurance companies is acceptable, and more than one in 10 say they approve of submitting insurance claims for items that were not lost or damaged or for treatments that were not provided, according to a survey released by Accenture (NYSE:ACN).
The survey, based on a random sample of more than 1,000 U.S. adults, examined consumer attitudes toward insurance fraud. Two-thirds of respondents (66 percent) said that people are more likely to commit insurance fraud during an economic downturn than when the economy is strong. About half the respondents ( 49 percent) said that people commit insurance fraud because they can get away with it.
Thirty percent of respondents linked insurance fraud to the offenders’ needs for money, while nearly one-fourth (24 percent) said they believe that the people who commit insurance fraud do so because they believe they pay too much for insurance. Twenty percent said they believe that the offenders commit fraud to compensate for the claims deductibles they have to pay.
“The Insurance Services Office, Inc. estimates that the cost of fraud in the U.S. property and casualty industry is approximately $24 billion, which represents 10 percent of total claims payments,” said Michael A. Lucarini, a partner in Accenture’s Insurance practice. “Fraud is a growing concern for insurers, whose aging technology and inefficient processes often prevent them from detecting fraudulent claims, which in turn hurts their long-term profitability. In addition, increased consumer exaggeration to improve the claims payout is becoming more prevalent in the current weakened economy.”
Slightly more than one in 10 of survey respondents (11 percent) said they knew of someone who inflated the value of their insurance claim. These respondents said they believed that these claims were mainly for auto and property/homeowners insurance (47 percent and 39 percent, respectively, of respondents who knew of inflated insurance claims).
Forty percent of respondents said they were unlikely to report someone who has committed fraud. However, 83 percent of respondents said they believe that insurance companies are capable of identifying or preventing fraud related property and casualty insurance claims.
“The burden is clearly on insurance companies to ensure they have the proper tools, technologies and skills to combat fraud,” Lucarini said. “Those committing fraud are becoming more sophisticated and advanced in their methods, while many insurance companies still lack the necessary processes and systems to detect and stop fraud. However, leading insurers are implementing Web-based technology that can help re-evaluate claims for fraud during the claims lifecycle and alert the appropriate people when thresholds are exceeded.”
And on the light side…
People may think they are being clever when they try to cheat insurance companies, but often they end up making mistakes that get them caught, injured and sometimes even killed.
The Progressive group of insurance companies says while the escapades of people who commit fraud can be amusing, insurance fraud is a serious crime that costs consumers a lot of money. The National Insurance Crime Bureau estimates that property and casualty insurers pay more than $30 billion a year in bogus claims costs which are generally passed on to consumers in the form of higher premiums.
“People think of insurance fraud as a victimless crime when, in fact, honest policyholders end up being victimized,” said Ray Albertini, Progressive’s national director of special investigations. “Most insurance companies base their rates on the cost of doing business. When costs go up because of fraudulent claims, other customers end up paying the price. People need to be aware of fraud and be willing to report it when they suspect it.”
Albertini says it can be tough to catch the offenders, but sometimes they make it very easy, such as in these cases:
- You never know who might be listening. One fairly common type of fraud people commit is buying coverage after their car’s been damaged. What’s less common is when they buy it from the scene of the accident. Take the case of the motorcyclist who wiped out and, while lying on the side of the road with a ruptured spleen, had the presence of mind to call 1-800- PROGRESSIVE to buy coverage. What he didn’t know was that a witness who saw the accident also heard him make the call. In another case, a couple’s car caught on fire. While the husband was on the phone with Progressive buying a policy, his wife was overheard yelling in the background that the car was about to explode.
- Unintended consequences. Some people figure the easiest and quickest way to collect insurance money is to destroy their car by setting it on fire. Not necessarily. Consider the case of two brothers who were hired to set a car on fire. They doused it with gasoline, and to make sure the vehicle would be completely destroyed, they decided to throw in a pipe bomb. The bomb exploded, setting one of the men on fire. He was likely killed instantly from the explosion, but his brother, not realizing that, rushed to extinguish the flames and ended up catching on fire. He ran toward a nearby highway for help and flagged down a state trooper who had come to investigate the black cloud of smoke. The man told the trooper what he and his brother had done and then, like his brother, passed away from his injuries.
- What’s wrong with this picture? A customer said some parts were stolen from his car, and to support his claim, he submitted what appeared to be phony invoices along with Polaroid photos. At first blush the photos looked pretty good, but something seemed a little odd about them. On closer inspection, investigators realized the guy had taken extreme close-ups of a toy car that was the same color and make of his actual car. The customer eventually admitted he took photos of the toy car in an attempt to get his claim paid.
- Miracle cure? A passenger riding in a customer’s car was injured in a crash and needed chiropractic treatment. No problem. The customer’s insurance covered it. However, sometime before completing the prescribed series of doctor visits, the passenger died of unrelated, natural causes. Now, you’d think that a person who is deceased would no longer benefit from a doctor’s care, but evidently, the chiropractor thought otherwise. He continued to bill for treatment for a full month after the patient’s death.
- That’s gonna leave a mark. A woman decided to take her boyfriend’s motorcycle for a ride. Unfortunately, she didn’t know how to drive and crashed it. Luckily, she wasn’t injured. The man, however, afraid his insurance wouldn’t cover the damage to his motorcycle because his girlfriend wasn’t listed as a driver on his policy, decided to pretend that he had crashed the motorcycle. He figured he needed some injuries to make his story credible, so he tied himself to the back of a truck and asked a friend to drag him around a little bit to produce the road rash he would have gotten from the wreck. Well, he got the injuries he wanted, but they didn’t do him any good. His girlfriend told investigators that in fact it was she who crashed the motorcycle.