Insurance fraud is a serious type of crime in which a person knowingly lies to their insurance company to try and claim money.
Although it may seem like a harmless crime, insurance fraud has serious consequences against those who try it, impacting their future careers and making it harder to find future insurance cover.
So, insurance fraud is pretty serious. As a result, everyone should be aware of it and know some basic facts regarding insurance fraud and its statistics.
Here are 31 insurance fraud statistics that everyone should know as it helps you understand what insurance fraud is and how it has a huge impact on our society.
31 Insurance Fraud Statistics Everyone Should Know
Here, I have found 31 statistics and facts regarding insurance fraud. Below each group of statistics, I have gone into what they mean and the kind of image they paint of the seriousness of insurance fraud.
This will hopefully give you a better understanding of insurance fraud, how it works, and how serious this kind of fraud is.
How Much We Pay For Insurance Fraud
- Insurance fraud costs both consumers and businesses over $300 billion every year.
- Of that number, American consumers suffer from $80 billion worth of damage.
- This means that businesses suffer $220 billion worth of damage every year due to insurance fraud.
So, insurance fraud is huge in the United States and every single year, billions of dollars is lost as a result of numerous schemes and scams which aim to defraud insurance companies of money.
This doesn’t just affect insurers as businesses and consumers all suffer as a result. This is generally through an increase of premiums to help cover the money lost through fraud.
As a result, every single American is affected by insurance fraud in some way.
Common Types Of Insurance Fraud
- Of that $300 billion yearly cost of insurance fraud, only $40 billion is related to non-health.
- In 2022, auto theft fraud losses was estimated to be $7.4 billion and was one of the lowest loss-incurring types of insurance fraud.
- Another study in 2017 claimed that auto insurers lose $29 billion a year due to insurance fraud and scams.
- The type of insurance fraud that incurred the most estimated losses in 2022 was Medicare and Medicaid Fraud with $68.7 billion.
There are lots of different types of insurance fraud committed every year but according to these statistics, health related insurance fraud is behind a majority of the damages.
Insurance fraud related to Medicare and Medicaid alone costs billions of dollars in a single year so it’s clear to see which kinds of insurances are most affected by fraud – healthcare, compensation, and casualties.
Attitudes Towards Insurance Fraud
- The average US family loses between $400 and $700 a year in increased premiums due to insurance fraud.
- In 2017, the Coalition Against Insurance Fraud found that nearly 4 out of 5 adult Americans are concerned about insurance fraud in some way.
- However, attitudes are more relaxed than they were in 1997 where 93% of Americans agreed that it was unethical to misrepresent an accident to claim insurance, while only 88% agreed in 2017.
- Similarly, only 84% of Americans agreed that inflated claims for insurance were unethical compared to 91% in 1997.
- Older Americans are less tolerant of insurance fraud than younger Americans.
- The most common reason used to justify insurance fraud is that premiums are too high.
- According to ValuePenguin, auto fraud is underreported with 29% of people not reporting their suspicions to their insurers.
Insurance fraud is likely to affect every American in some way, whether they are a victim of insurance fraud themselves or they are forced to pay higher insurance premiums due to insurance fraud.
Despite this, there has been a common trend in the attitude towards insurance fraud. While Americans remain worried and concerned about insurance fraud in some way, more people are seemingly becoming more sympathetic to fraudsters.
This is apparently more likely in younger Americans compared to older Americans, indicating that we will see more and more sympathetic viewpoints to those who commit insurance fraud in the coming years.
Why this is the case varies from person to person.
The surveys organized by the Coalition Against Insurance Fraud show that common justifications people give for insurance fraud ranges from premiums being too high for people to afford to insurance companies being rich enough to hand out cash to fraudulent insurance claims.
Some people do not even report suspicious and potentially fraudulent activity to their insurers, indicating that a lot of people are willing to let fraud slide and see it as a minor, petty crime.
Insurance Fraud Tactics
- In 2020, nearly 9,000 motor vehicles were purposefully set on fire in the US.
- Back in 1998, the Coalition Against Insurance Fraud (CAIF) announced that only $80 billion was lost through insurance fraud in the United States.
- A 2019 survey by CAIF found that 65% of businesses reported a fraud increase over the past 3 years.
- There are 2 types of insurance fraud – one is known as hard fraud (which involves deliberate damage and destruction) and the other is soft fraud (which involves lying, exaggeration, or withholding important information).
- According to FRISS, a form of fraud was present in 18% of insurance claims in the US during 2020.
- In 2021, the most common insurance fraud schemes around the world included false injuries, staged accidents, multiple claims for the same incident, and the nondisclosure of relevant information.
- According to the FBI, common fraud tactics committed by medical providers include double billing, phantom billing, upcoding and unbundling.
- Common insurance fraud tactics committed by patients include prescription forgery, prescription diversion, and identity theft.
According to these studies, surveys, and statistics, insurance fraud is on the rise.
Not only are there more reported incidences of insurance fraud but fraudsters are trying all kinds of tactics to defraud insurance companies.
From exaggerating injuries and casualties to falsely claiming them, purposefully organizing accidents or property damage, to withholding vital information from insurance companies that affects the outcome of claims – fraudsters will try anything to defraud insurers.
Some consumers may even have their identity stolen so others will fraudulently claim on their behalf, especially when it comes to healthcare fraud.
And it’s not just consumers – businesses will also try to defraud their customers and their insurance companies through a range of methods.
Whether it’s billing customers and health insurers for procedures that never happened or trying to bill customers twice for the same medical treatment, businesses are just as guilty of fraud as consumers!
How Insurance Fraud Is Being Tackled
- In that same survey, 66% of survey respondents claimed they would tackle fraud by funding predictive tools.
- 21% of insurers in 2019 planned to invest in artificial intelligence (AI) over the next 1-2 years to help tackle insurance fraud.
- Insurance fraud is illegal in all 50 US states and the District of Columbia.
- In 2019, the US Department of Health and Human Services (HHS) only recovered $5.9 billion from fraud investigations.
- HHS also excluded 2,640 individuals and entities from being able to participate in deferral healthcare programs such as Medicare and Medicaid due to insurance fraud.
- In 2020, 440 people were convicted due to healthcare insurance fraud and related crimes.
- Corporate and white collar prosecutions for insurance fraud were at an all time low in 2020.
- Whistleblowers can earn a portion of recovered under the False Claims Act, and in 2019, this number amounted to $3 billion.
- 9 US cities ranked in the world’s top 20 worst cities for healthcare scams and fraud. These cities were Memphis, New York, San Antonio, Los Angeles, Cleveland, Saint Louis, Columbus, Miami, and Louisville.
As statistics prove that insurance fraud is on the rise, there has been a change in the way insurance companies and departments of the United States government react and tackle these issues.
More insurance companies are looking to tackle fraud through predictive tools and artificial intelligence to help comb through claims and pick up any suspicious activity through patterns and checks.
This could mean that in the future, technology will be relied on to help reduce insurance fraud – at least through insurers and insurance businesses.
More states have stepped up insurance fraud laws in order to come down more heavily on fraudsters. A few years ago, insurance fraud was not always considered a specific crime in every state while as of 2022, it is.
This has led to more insurance fraud cases being taken to court, more individuals and entities being banned from healthcare programs due to insurance fraud, and departments such as the HSS being able to recover more money through investigations.
However, the future is not all that rosy. The US has some of the worst cities in the world for healthcare scams with 9 cities taking up nearly half of the list.
Corporate and white collar prosecutions are down, meaning that justice departments are seemingly only tackling smaller, independent fraud claims and not looking into bringing justice down on overall systems and businesses.
This statistic puts a glaring light over what justice systems are prioritizing when it comes to insurance fraud – they are choosing to target individual cases of a few hundred dollars each, rather than companies which can defraud their customers of hundreds of thousands of dollars.
So, recent statistics paint a pretty bleak picture regarding insurance fraud.
According to the above statistics and the surveys they are from, insurance fraud is on the rise and it is costing everyday Americans hundreds of dollars.
Areas such as healthcare insurance are some of the biggest insurances defrauded every year, especially programs such as Medicaid and Medicare.
Insurance companies are trying new types of technology to tackle the rise in fraudulent claims they are facing. However, it’s not just consumers who are committing insurance fraud.
Businesses such as medical providers or auto vehicle mechanics are taking advantage of their customers, defrauding their insurances by forcing them to pay for procedures and services that never happened.
Justice departments are statistically more likely to let off businesses and enterprises, preferring to hold individuals accountable for their actions.
We can understand all of this through learning statistics alone which just goes to show how important these insurance fraud statistics are and why everyone needs to be aware of them!
Frequently Asked Questions
What Type Of Fraud Occurs Most Frequently In Insurance?
The most common type of insurance fraud is actually premium embezzlement. This occurs when an insurance agent pockets the premium money for themselves instead of sending it to the underwriter. This type of fraud is known as premium diversion.
What Are The Three Fraud Factors?
The three faud factors are components which when combined, lead to fraudulent behavior. These three faud factors include opportunity, motive, and rationalization.
Each factor is easy to understand. Motive means that the person committing fraud has a reason to commit the fraud in order to gain more money, such as being in a tough personal financial situation.
Rationalization is the thinking behind why a person believes they are right to commit fraud, such as thinking they ‘deserve’ the money because of how much they pay in insurance.
Finally, opportunity is when the person has the time, alibi, and tools needed to commit fraud, meaning that it is no longer an idea but has the potential to become a real crime if they go through with it.
What Are Some Samples Where Insurance Fraud Occurs?
There are lots of types of insurance fraud but here are some examples.
One is false or inflated theft repair claims, where owners claim something has been stolen or inflate the value of what has been stolen to try and get more money.
Another type is a staged accident in order to claim insurance money, and intentional damage claims where owners have purposefully damaged their property to try and claim money.
These are just a few samples of insurance fraud, and there are tons of different types out there across different kinds of insurances.
Paul Martinez is the founder of BendingDestiny.com. He is an expert in the areas of finance, real estate, and eCommerce.
Join him on BendingDestiny.com to learn how to improve your financial life and excel in these areas. Before starting this blog, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.