Study: Insurers Link Fradulent Claims to Bad Economy

Is the poor economy driving people to commit insurance fraud?

A new industry study shows that an uptick in the number of questionable insurance claims related to possible cases of insurance fraud during the past year could be tied to the bad economic conditions.

While there has been considerable speculation within the insurance industry and law enforcement that money woes have forced some people to fraudulently collect on their insurance policies, to date, there has been no solid statistical evidence to back up that speculation. But a new report by the National Insurance Crime Bureau (NICB) indicates an increase in the number of questionable claims related to possible cases of insurance fraud during the past year as the economy continued to tank.

An analysis of questionable claims submitted by the more than 1,000 NICB members insurance companies in the first quarter of 2009, versus the first quarter of 2008, shows a definite increase in claims related to what is termed “opportunistic fraud.”

Examples of opportunistic fraud include:

A hail storm causes limited damage to a section of shingles on a house, but the homeowner, seeing the opportunity to get an entirely new roof from his insurance company, deliberately causes more extensive damage. The NICB report shows that questionable claims for hail damage increased 407 percent in 2009 compared with 2008.

A car owner who is having trouble making payments on a recently purchased vehicle decides to torch the car (suspicious fire/arson), pays someone to take it, or he drives it to a remote area and abandons it (owner give-up). The car is then reported vandalized or stolen. The insurance company writes a check to the car owner, who uses that money to pay off some of or the entire outstanding loan. Claims related to suspicious vehicle fires/arsons were up 27 percent in 2009 compared to 2008 and owner give-ups increased 24 percent.

Slip-and-fall accidents are another example of opportunistic fraud and insurers submitted 60 percent more questionable claims related to slip-and-falls under casualty policies and 77 percent more under commercial policies. Suspected fraudulent claims related to workers’ compensation insurance were up 71 percent.

A previous report by NICB in October 2008 looked at owner give-ups from 2004 through March 2008, and showed a correlation between an increase in the number of give-ups and the rising cost of gasoline during that period. A large number of the give-ups involved less fuel efficient large sport utility vehicles and pickup trucks.

The NICB report covers only questionable claims submitted by member insurance companies. These claims have already been reviewed by the companies and classified as possibly fraudulent.

“Desperate times sometimes cause people to take desperate measures,” said Joe Wehrle, NICB’s president and CEO. “Some people think it is okay to cheat an insurance company, but the fact is, they are breaking the law, risking jail time, and causing everyone else to pay more for their insurance coverage.”

“The NICB’s report is in line with much of the data and anecdotal information we’ve gathered from our insurer members and other sources,” said Dennis Jay, executive director of the Coalition Against Insurance Fraud (www.insurancefraud.org). “The poor economy may be driving normally good people to do bad things. Hardcore insurance criminals also have more opportunity to entice normally honest people into their fraudulent schemes.”

Source: National Insurance Crime Bureau,
www.nicb.org