RiskTech Forum

Insurance Fraud in the US

Posted: 12 December 2012  |  Source: Chartis

The cost of fraud to insurance firms has been estimated at €8bn in fraudulent payouts in the EU and at $30bn for property and casualty fraud in the US. Despite the fact that an estimated 10-15% of annual premiums go towards the cost of fraud, many insurers seem resigned to accepting a certain level of fraud. 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 needs to change, as the current environment 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. Simultaneously, the internet is making it easier to commit fraud.

Moreover, 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.

To reduce fraud in the current environment, insurers need to:


The key findings of the survey show:


The global survey showed that non-US insurers are in a comparable position to US firms; they are more concerned by the challenges the insurance industry faces and more willing to invest in technology systems to improve fraud prevention.

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