After posting a couple of articles about insurance fraud in August, I was emailed a link to this article about insurance fraud on the website of Florida’s Association of Insurance Agents. The article was written by Fred Wharton and he made this comment about the economy and its impact on insurance fraud:

Insurance fraud continues to grow in the United States and is reaching into the hundreds of billions of dollars annually. With America’s sagging economy threatening well into 2009 and beyond, fraud fighters are observing many kinds of insurance schemes spiking as stressed policyholders try to bilk insurers to help bail them out of financial distress.
Insurance fraud normally increases during a troubled economy. The credit crunch, sub-prime meltdown, and general economic distress have led more insureds to seek a bailout through insurance money.

The article continues to discuss a few types of insurance fraud and how it has increased on specific policies. In conclusion, Fred mentions fraud on workers’ compensation insurance and then some of the overall impacts of this crime:

Experts on workers’ compensation premium fraud say declining economic conditions have resulted in more employers falsifying employee classification, understating payrolls or attempting to evade coverage requirements. The Coalition Against Insurance Fraud, reported “a trend towards passing laws making premium fraud a specific crime.” California, Florida, Illinois, New Jersey, New York, and Texas are among the states that have made workers’ compensation premium fraud a specific felony. This is, in part, because of growing attention being paid to the so-called ‘underground economies’ of many states. Premium schemes also will be influenced by how U.S. President Obama deals with the flood of immigrants who fuel the underground economy, the coalition’s Dennis Jay notes. Unabated, illegal immigration could encourage the social and economic conditions that allow premium fraud to thrive, thus immigration policy will need to consider the impact on costly societal problems such as premium fraud.

If you look beyond the high dollar costs and economic decline, you’ll also see honest, hardworking Americans whose lives, businesses, careers, and families are damaged or even ruined by insurance fraud crimes.

● People lose their savings. Trusting citizens are bilked out of thousands of dollars, often their entire life savings, by insurance investment schemes. The elderly are especially vulnerable.

● Health is endangered. People’s health and lives are endangered by swindlers who sell nonexistent health policies or doctors who perform unnecessary medical care to illegally inflate health insurance claims.

● Premiums stay high. Auto and homeowner insurance prices stay high because insurance companies must pass the large costs of insurance fraud to policyholders.

● Consumer goods cost more. Prices of goods at your department or grocery store keep rising when businesses pass higher costs for their health and commercial insurance onto customers.

● Honest businesses lose money. Businesses lose millions in income annually because fraud increases their costs for employee health coverage and business insurance.

● Innocent people are killed and maimed. People die from insurance schemes such as staged auto accidents, life insurance scams, and arson — including children and families. People have been murdered for life insurance benefits.

Government at all levels, federal, state and local, understand these issues and realize that insurance fraud can no longer be looked at as a victimless crime or just the insurance companies’ problem. As such, many states have mandated anti-fraud initiatives and anti-fraud plans to help combat this growing problem. Sixteen states currently require anti-fraud training; nineteen states require insurers to file a fraud plan, which includes tactics to combat fraud.

As economic recovery appears to be a lengthy proposition, industry members must do their part to become familiar with and combat insurance fraud.

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