The new yearly insurance fraud estimate is the first time in 27 years the figure has been updated, according to the Coalition Against Insurance Fraud.
“Our goal is that when this study is updated next time, for that figure (cost of fraud total) to go down. There’s no reason it shouldn’t,” Matthew J. Smith, Esq, executive director of the Coalition Against Insurance Fraud, said. “We have technology, we have the resources, we have great insurers in this country, and we have legislators and regulators who are interested. Let’s work cooperatively to get that number down.” (Credit: Olivier Le Moal/Adobe Stock)
Insurance fraud has a $308.6 billion annual cost to U.S. consumers and businesses, according to the Coalition Against Insurance Fraud.
The new yearly cost of insurance fraud estimate is the first time in 27 years the figure has been updated, according to Matthew J. Smith, Esq, executive director of the Coalition Against Insurance Fraud. For the first time, the new figure extends beyond property & casualty insurance to include fraud in lines ranging from life and health to workers’ comp and auto theft.
Looking more granularly, fraud in P&C lines amounts to $45 billion each year. This total excludes fraud from auto theft claims, as the Coalition and its research partners at Colorado State University Global examined them as separate lines of business. Broken out separately, the current cost estimates for auto theft are $7.4 billion, the Coalition reported.
Likewise, the figure for P&C fraud costs also excludes workers’ comp fraud, which was analyzed as a separate line. Annually, workers’ comp sees $34 billion in fraud, according to the Coalition’s Workers Compensation Fraud Task Force. Around $9 billion of that total comes from workers’ comp premium fraud, while $25 billion comes in the form of claims fraud.
A statistic 27 years in the making
When initially released in 1995, the cost of insurance fraud in the U.S. was determined to be around $80 billion annually. This figure only included fraud in the property and casualty lines and a few other ancillary lines, Smith explained during a press briefing. In fact, the $80 billion estimate had not even been updated to reflect inflation. When applying inflation, the annual cost would balloon to $152 billion in 2022.
In addition to considering more lines of business and adjusting for inflation, the annual cost of insurance fraud was dramatically impacted by the growth of the internet.
“In 1995, that little thing we called 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.”
Smith went on to explain the undertaking to update the fraud cost figure was done to raise awareness around insurance fraud and help consumers realize how big of stakeholders they are in fighting fraud.
“Our goal is that when this study is updated next time, for that figure (cost of fraud total) to go down. There’s no reason it shouldn’t,” Smith said. “We have technology, we have the resources, we have great insurers in this country, and we have legislators and regulators who are interested. Let’s work cooperatively to get that number down.”
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