While the news media reports that instances of insurance fraud have gone up during the recession, this may or may not be the case. There is no national system for the investigation of insurance fraud. That's why estimates of the annual cost of such cases to the industry cover such a broad and amorphous range. Right now the best guess suggests $80 billion to $200 billion annually. The discovery and punishment of insurance fraud rests in the hands of private, state, and federal agencies with differing record keeping and reporting systems, leaving us with a speculative picture at best about the real nature of fraud driven by economic factors.
It is possible to say, with some degree of certainty, that fraud cases are more likely to occur in larger metropolitan areas, with the states of Florida, California, New York, Louisiana, and Texas reporting especially high levels in the last half of 2009 and the first half of 2010. Otherwise, available data paints a conflicting picture. For instance, more consumers who are out of work and who have lost their benefits are falling for health insurance scams, but cases of fraudulent workers compensation claims are down due to high unemployment.
The Coalition Against Insurance Fraud, a group of insurance companies and consumer advocates based in Washington, D.C. surveyed companies on the topic in mid-2009. They concluded that exaggerated and false auto insurance claims were on the rise, as were false liability cases, and incidents of slip-and-fall injuries. Highly specific types of damage can also be isolated in some cases. For instance, the National Insurance Crime Bureau completed a study in August 2010 showing a 14% increase in suspicious auto insurance claims involving smashed windows during the first six months of the year.
Frank Scafidi, a spokesman with the Bureau interviewed by the Charleston South Carolina, Post and Courier earlier this year said, "There are examples [of insurance fraud], but it's not the kind of national hand-wringing, the-sky-is-falling situation that [the national media] would have you think." There are, however, a number of factual statements regarding insurance fraud in general that may apply in a larger degree during the recession because they speak to areas in which cash-strapped consumers would have significant problems.
- The largest number of insurance fraud cases investigated in the United States involve Medicare, Medicaid, and private medical claims due to the high cost of health care.
- Cases of medical identity theft are on the rise, affecting more than 1.4 million consumers.
- Staged auto accidents are second only to smashed-window cases in instances of automotive fraud that are responsible for higher coverage premiums, a hardship on all consumers since some degree of auto insurance is mandated by law.
- Slip and fall fraud cases are on the rise and run up claims of more than $2 billion for both homeowners and businesses annually.
Many individuals who engage in insurance fraud later express their anger at having paid premiums for years with no perceived benefit in a monetary sense. Many say they were simply trying to get back their own money, or "what they deserved." Unfortunately, when insurers are hit with fraudulent claims, one of the ways in which they seek to recoup their losses is by raising premiums for all their honest customers who have done nothing wrong. Seen in this light, fraud is a much more serious and egregious industry problem regardless of the state of the economy at the time at which the claim occurs.
