Every year, the insurance industry as a whole spends $30 billion on fraud according to a study in May 2009 conducted by the Insurance Information Institute. That is about 10 percent of their losses and loss adjustment expenses. The cost of 10 million Ipods? Just over 2 billion.
What does this mean for you? That means that if you have had a claim recently, some crook took your insurance company for at least 10 percent of whatever your settlement was. It also means that the insurance company has to recoup those losses somehow, and to do this they need to increase their premium or cut valuable services.
Let’s examine what $30 billion actually means:
A = The amount of fraud in the U.S. every year
B = The cost of 100,000 Cadillac STS's
C = The total NY Lottery prize payout in 2009
D = The cost of 10 million Ipods
There are different types of fraud, sometimes referred to as "hard" or "soft" fraud. Hard fraud occurs when someone deliberately plans to commit a fraud and sets out a plan to do just that. Examples are staged collisions, arson, faking injuries for benefits, or doctors who charge fees for treatments or medications that were never given. Soft fraud is sometimes referred to as "opportunistic fraud" and this occurs when someone who has a legitimate claim exaggerates the damages to profit from the loss.
Think about these numbers next time you are someone you know has an insurance claim.
