Dick Patterson | Reducing the Cost of Insurance Fraud:
ICS Commitment to the Future and
the Claims Adjusting Industry
Insurance fraud is one of the most costly white collar crimes in America, second only to tax evasion. Fraud of all types costs consumers hundreds of billions of dollars around the world. Within the United States alone, fraud is estimated to cost P&C insurance companies over $21 billion a year1.
Insurance fraud occurs when someone tries to make money from insurance transactions by deceiving others. Insurance fraud is a criminal offense. Some common types of insurance fraud are as follows:
|
Type |
Example |
| Fraudulent insurance claims |
A hospital bills a patient's insurance company for procedures not performed.
A homeowner inflates a claim to cheat the insurance company.
|
| Agent fraud |
This occurs when a consumer gives money to an insurance
agent and receives nothing in return or receives a product that was not
desired.
|
| Unauthorized insurance |
The sale of insurance by unlicensed companies. |
| Counterfeit proof-of-insurance cards |
Sold to people who do not have automotive liability insurance required by law. |
Public concern about the price of insurance and the solvency of the
insurance industry has prompted the insurance industry to conduct both internal
and external reviews of the various insurance cost elements. According to a
published study by the Coalition Against Insurance Fraud (CAIF), fraud is among
the most prominent cost components escalating the costs of insurance.
The National
Insurance Crime Bureau2 has estimated that at least 30 percent of
302 property/casualty insurance company insolvencies between 1969 and 1990 were
brought on by fraudulent activities.
The National
Insurance Crime Bureau has also estimated that the cost of all forms of
insurance fraud can be as high as $160 billion per year. This is equivalent to
$600 for every man, woman and child in the United States. The
property/casualty estimates are approximately $21 billion per year, or 10 cents
for every property/casualty premium dollar. This translates to approximately
$200 for the average American household.
Property and casualty insurers offer a wide
range of policies that protect owners of autos, homes, and businesses against
losses, theft, damage, and personal injury. Because the offerings are so all
inclusive, the companies deemed easiest to work with will have distinctive web
sites and offer means of electronic data exchange that features ease of use and
promotes efficient interaction.
As insurance companies face the challenge
of increased competition, they are looking for any means to reduce their
expenses. Not only does reducing fraud add to the bottom line by reducing
premiums but it also presents an opportunity for service providers to develop
deeper customer relations through the use of the Internet. Information
technology and eBusiness models provide many tools to reduce underwriting and
claims fraud as well as improve Customer Relations Management (CRM).
ICS is currently using the internet and electronic reporting
to reduce the opportunity for fraud and unethical activity, improve claim
response time, reduce costs, and to enhance its interactions with both the
insurer and the insured. We will continue to
explore leading edge electronic reporting models and introduce the most
relevant innovation to ensure effective customer relations and claims
resolution.
1 http://www.insurancefraud.org/
2 http://www.nicb.org/
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