There is no question that insurance fraud costs Americans billions of dollars annually. According to the Coalition Against Insurance Fraud (CAIF), the business of fraud costs the industry an estimated $80-$120 billion each year.
Of course, this translates to increased insurance premiums, which has a negative impact on not only the consumer but also on the economy in general.
According to most sources, the problem is only getting worse. For instance, studies from the Insurance Information Institute show that “staged accidents” increased 52 percent in the state of Florida from 2009 to 2010.
During a recent presentation to non-industry professionals, I shared statistics related to fraud, such as Florida drivers paying $549 in additional premium specifically as the result of staged accidents. As industry veterans, many of us have become so inured to the problem that we do not realize that most people outside the world of claims are unaware of its existence. My audience, for example, was shocked to learn that 32 percent of all billings for auto-accident-related injuries in the state of Florida are for services never even rendered.
Staged accidents, swoop-and-squats, run-downs, cappers and pill mills are foreign terms to the average vernacular, but are nevertheless part of a significant problem that needs to be addressed.
I began my adjusting career a number of years ago in South Central Los Angeles. At the time, the area was the nation’s epicenter for insurance fraud and staged accident rings. The Los Angeles County District Attorney opined then that as many as 50 percent of local auto claims contained elements of fraud.
The problem has only gotten worse, expanding to cities of all sizes from coast to coast. To think that staged accidents are limited to Miami, L.A. or New York is a fallacy. While the propensity for fraud may be higher in some jurisdictions than others, the magnet of easy money is universal.
SPOT THE SIGNS
Improving claims processes to proactively identify potential red flags is critical to reducing fraud. At the highest level it takes insurers working with law enforcement and the courts to create effective deterrents. The law-enforcement community must have the teeth necessary to investigate, while insurers must contend with unscrupulous trial lawyers who use bad case law to force payments for claims that never even occurred.
This is all virtually meaningless unless there is an acute focus to basic blocking and tackling by adjusters, who must have the fundamental knowledge and skills to identify, investigate and report fraud. Far too often, these skills are missing, as the cultural focus of some insurers has moved away from true investigation to mere claims processing.
Insurance claims is not a career for just anyone. It takes a unique set of skills—not the least of which is intuition—to effectively investigate and resolve claims.
Hiring the right people is the foundation and training them to properly conduct a thorough investigation is a means to success. At the end of the day, however, claims comes down to one’s ability to have the perception necessary to seek out the truth in an increasingly complex world.
