FRAUD STILL A SERIOUS PROBLEM

An Insurance Research Council (IRC) and Insurance Services Office Inc. survey shows that insurers of all sizes consider fraud “a serious problem.” According to a PRNewswire report, more than one-third of insurers feel that the amount of fraud has grown over the past three years. The survey reported that more than 40 percent of insurers claim spending more to fight fraud during the past three years. However, insurers rate their efforts in the war on fraud as only somewhat effective. Survey respondents noted private passenger auto and workers’ comp as the two lines of insurance subject to the most fraud. Respondents indicated that medical malpractice, earthquake, and products liability are subject to relatively small amounts of fraud. Respondents also indicated that “soft fraud”—exaggeration of otherwise legitimate claims, often committed by individuals acting alone—is far more frequent than “hard fraud”—deliberate attempts to stage losses, often committed by organized rings. Because of the frequency of soft fraud, it adds more to overall claim costs than hard fraud does. While more than two-thirds (68 percent) say their companies’ programs address claims fraud “thoroughly,” only 25 percent say they address application fraud “thoroughly,” and 19 percent say they address premium fraud “thoroughly.” On a list of 30 items that insurers rated in terms of their importance to anti-fraud efforts, eight of the top 15 relate to the critical nature of support from law enforcement, prosecutors and judges; tough civil and criminal penalties for committing insurance fraud; and statutes that support insurers in the war on fraud.