While we all know that insurance fraud is a massive problem, we now know just how massive: more than $300 billion-a-year massive, just in the U.S.
That figure comes from the Coalition Against Insurance Fraud, whose estimate would mean that fraud costs each person in the U.S. some $930 a year and the average family some $3,750. The estimate is nearly four times as high as the group's previous estimate, in 1995, of $80 billion of fraud a year in the U.S. -- largely because of inflation and because the coalition looked at more types of fraud this time around, but also because the internet has allowed for new forms of cheating.
“We updated our study because regulators of insurance need to know this information, as do legislators in Washington, DC, and in our state capitals all across America,” said Matthew Smith, the coalition’s executive director. He said the goal is to put a target on fraud, so that, the next time the group produces an estimate, the number will have fallen. “There’s no reason it shouldn’t,” he said.
Life insurance registered the most fraud, at roughly $75 billion a year. Next was Medicare/Medicaid, at nearly $70 billion, followed by property/casualty ($45 billion) and healthcare and workers' comp (about $34 billion each). The report says that roughly $25 billion of the workers' comp fraud occurs via false claims, while some $9 billion is because of falsification that leads to underpayment of premiums. Auto theft -- which was not included in P&C -- totaled $7.4 billion a year.
The coalition singled out the internet as a significant enabler of fraud since it last did a comprehensive estimate of industrywide fraud.
“In 1995, that little thing we call the internet was only about four years old,” Smith said. “We all know the internet has revolutionized every aspect of life, but it also opened new areas and avenues for insurance fraud.”
The internet, and a host of related technology advances, should also, in my view, make it easier to spot fraud. We've all seen how people making fraudulent claims against workers' comp have been caught through posts on social media showing them playing golf, skiing or doing something else that shouldn't have been possible, given the extent of their "injury." Big data and the ability to analyze it have made it easier to spot doctors generating such high volumes of "treatments" that they likely are in league with fraudsters. Sensors in cars will increasingly tell us what happened in an accident -- and what didn't happen. And so on.
Fraud will always be a cat-and-mouse game. Yes, the bad guys have gained an advantage because the internet has expanded their reach. But technological advances, including the internet, give the good guys a lot of new tools, too -- if we use them.
Here's hoping the next report by the coalition does, in fact, show that the good guys have managed to fight back powerfully.
P.S. I'm drawing my numbers for the report from two news articles, here and here. I'd obviously use the report itself, but as of Monday evening, as I write this, the page on the coalition website where the report is supposed to be returns an error message when I click on it. Here is the link to that page, on the assumption that the coalition will soon fix the error.