RiskTech Forum

Insurance Fraud

Posted: 13 December 2012  |  Author: Shane Murray, Chartis Research

Many insurers seem resigned to accepting a certain level of fraud, despite the fact that an estimated 10-15% of annual premiums go towards the cost. 

Within the EU the cost of fraud to insurance firms has been estimated at €8bn in fraudulent payouts and $30bn for casualty and property fraud within the US. Today, so many people believe that it is acceptable to defraud insurers that some insurers believe that fraud is an insoluble problem and anti-fraud initiatives should not be a priority.

This ethos needs to change, as the current situation is increasing the cost of fraud to insurance firms. Rising economic pressures and a backlash against all financial institutions in the aftermath of the financial crisis are pushing more people to rationalize insurance fraud.

The internet is also making it easier to commit fraud.  The growing sophistication of professional fraud rings, aided by the internet, is resulting in a higher number of organized scams with higher velocity, greater agility, and greater cross-channel and cross-industry scope.

Although some insurers have set up major case departments, many others still base their approach to fraud on catching ‘opportunistic fraud’ (one-off frauds by individual customers), instead of preventing lower frequency but higher cost ‘professional’ frauds.