Seven Detroit firefighters were seriously injured when an officebuilding engulfed in a gasoline-fueled fire collapsed on them.One was paralyzed and several had crushed bones. The man who setthe fire did so for a very "simple" reason: the insurancemoney.

A New York man had the idea to torch both his home and his convertible, allfor the insurance money. According to police reports, the manclaimed the blaze started when pans on his stove ignited. Aftertrying to extinguish the fire with a rag, he said he threw thefirst pan out the door, where it landed in the backseat of hisconvertible, which burst into flames. Then while en route totossing the second pan outside, he tripped and the pan landed onhis couch.

The risk to life can be high in the name of insurance fraud andthe economic toll can be enormous. Half of property-casualtycompanies report that between 11 cents and 30 cents or more of eachpremium dollar is lost to "soft" fraud alone. The Coalition AgainstInsurance Fraud estimates that fraud for all types of insurance costs $80 billionannually, making it the second-largest economic crime in theU.S. after tax evasion.

We'll never completely wipe out insurance fraud; people who seekto gain at the expense of everyone else will continue to exist, aswill those who convince themselves that the only victim is afaceless insurance company. There was a time not too long ago wheninsurance fraud was perfectly acceptable among policyholders: "Hey,I've paid for insurance my entire life; what's wrong with paddingthe bill once in awhile?"

We all know the saying "knowledge is power." Knowledge is whatmakes or breaks a government or an industry. When there ismisrepresentation, it is up to the people or the organizationinvolved to correct it. For insurance fraud, our industry isresponsible for educating consumers on how all that bill padding orthose extra few dollars added to a claim translate to higher ratesfor everyone. No one else is going to do it.

According to the Insurance Research Council (IRC) public opinionstudy released in March, nearly one-quarter of Americans believe itis acceptable to increase an insurance claim by a small amount tomake up for deductibles they are required to pay. While this islower than the 33 percent the IRC found in a 2002 telephone survey,it is still disturbing. Even more disturbing are the responses fromthe younger generation—those in the 18 to 34 group—particularlymales. An astounding 23 percent of young men have no problem withdefrauding an insurance company. This compares to only 5 percent ofolder men, and 8 percent of women in the same 18-to-34 agebracket.

There was some positive news coming from the study: people arebeginning to understand that insurance fraud costs them money. TheIRC study found that 86 percent of Americans agreed with thestatement, "Insurance fraud leads to higher rates for everyone."Unfortunately, 10 percent believed that "insurance fraud doesn'thurt anyone." The Insurance Information Institute puts fraud at about10 percent.

The little white lies that crop up from time to time oninsurance claims aren't so little. They have amounted to billionsof dollars in losses each year. During the 5-year period from 2007to 2011, property-casualty insurance fraud had cost the industryapproximately $32 billion each year, causing most economicdamage to health, workers' compensation, and auto insurance linesof business.

The National Insurance Crime Bureau, an organization thatreviews and investigates questionable insurance claims, found thatsuch claims were up 16 percent last year to a record 116,268, compared to the 100,450 from the yearbefore. Auto insurance saw a rise of 15 percent in questionableclaims—34,585—from the year prior, and questionable propertyinsurance claims increased 39 percent in 2012 over the previousyear. It seems that as more Americans realize that lying on a claimform is a crime, the swindlers who make a good living from it aregetting better at their "job."

It wasn't until the 1980s that insurance fraud began to make ablip on anti-crime radars. Rising insurance costs and growth inorganized fraud groups catapulted the effort to pass strongerantifraud laws, but that wasn't—and isn't—enough to end the crimeof insurance fraud. Insurers, agents and brokers, and industrygroups must educate policyholders and the general public about theimportance of insurance, how it works, and how the crime of fraud,whether "soft" or "hard," affects every American.

Every policyholder should see how much extra he or she must paybecause of bogus claims or when a claimant wants to add "just a fewdollars" to make up for his or her deductible. As we do that, andas those same consumers see the effect of fraud on theirpocketbooks, we can finally help them understand that insurancefraud is not something that "doesn't hurt anyone." Once theyunderstand, consumers will see that padded claims and other formsof fraud are theft, plain and simple, and that they themselves arethe victims.

Property-casualty insurance is a cornerstone of worldwidecommerce. Much of the American economy would grind to a haltwithout it. Factories, stores, and offices could not face the riskof operating without it. Most individuals would be unable tofinance their homes, and many would have difficulty arrangingcredit for other big-ticket items. Those who could would still facethe possibility of financial ruin if they were sued or wereinvolved in serious accidents. Thus, a healthy property-casualtyinsurance industry is essential to the vitality of the economy andnecessary for the security of our nation's people.

Insurance fraud, in all of its many forms, chips away at thateconomic foundation. In making coverage more expensive foreveryone, it increases the chances that a driver will try to escapepaying for required liability coverage, or that a young couple willhave to risk going without certain coverages for their new homebecause they can only afford the most basic policy.

Related: Read "5Steps to a Better Fraud Detection Program"

"10'Red Flag' Warning Signs of Workers' Compensation Fraud"

"InFraud Fight, Insurers Succeed With Teamwork"