Insurer Outreach Campaign Required To Convince People Fraud Hurts All

Fewer people think it's unethical to lie on insurance applications, file a claim for damage before the damage actually happened, or inflate a claim to cover the deductible, according to the coalition's study, "Four Faces of Insurance Fraud."

In fact, one of five adults thinks various insurance schemes are ethical. That means about 45 million people are potential cheaters, or would have few qualms when others do it.

Fewer than two of five adults feel good about the insurance industry as a whole, the coalition's research shows. That's also sharply down from a decade ago, which means about 90 million adults are discontented. Many could easily rationalize cheating insurers if they see a chance.

High tolerance for fraud mixed with a sour economy is a bad combination for insurers. The National Insurance Crime Bureau recently reported that during the first quarter of 2009, suspicious car fires were up 27 percent, suspect slip-and-fall accidents rose 77 percent, and potentially bogus workers' compensation claims increased by 71 percent.

Most Americans believe insurance fraud is prevalent in America, the coalition study reveals. The implication is important. Wild bears grow bolder if they become too used to humans. Similarly, people may become bolder about fleecing insurers if they believe insurance fraud is an accepted part of American life. Everyone does it, so why not me? Financial desperation makes cheating even easier for Americans to justify.

Too few consumers fully appreciate the vast benefits that the industry brings to society. If they did, far fewer would so willingly bleed an industry that makes millions of Americans financially more secure and protects businesses and people's jobs when commercial losses strike.

Our economy is far better off thanks to the stabilizing effect insurance protection provides in this recession.

Even so, fraud losses continue costing property-casualty insurers tens of billions of dollars each year. By any measure, this price tag is an unacceptable drain on insurer profits and stockholder value. The sad fact is that the fraudsters are making more profits off insurance than insurers do. Even in their best years, the combined profit of the industry is less than the estimated annual price tag of insurance fraud.

Fraud erodes our social order, making America a more chaotic, me-first nation where average consumers consider fraud an acceptable form of self-enrichment at insurer expense.

Simply transferring fraud losses to policyholders via higher premiums is a poor solution. By raising premiums, insurers risk reinforcing people's antagonism toward the insurance industry, which in turn encourages more fraud.

Nor can insurance fraud simply be arrested out of existence. This crime is too persistent and profitable.

More is needed to turn the corner on fraud and reverse the undesirable attitudes and unwanted behaviors that allow fraud to thrive. This is the job of public outreach–communicating with the masses and engaging honest consumers to be partners in curbing fraud.

Many people have few problems rationalizing this crime. They think:

o Fraud is a harmless prank and insurers won't miss the money.

o I deserve payback because I haven't made any claims.

o There's no risk I'll get caught.

o I'd turn in crooks, but nobody will investigate.

Worst of all, there's little peer pressure to deter this crime.

Investing in public outreach has proven remarkably effective against large and resistant societal problems such as fraud. National campaigns against drunk driving, the spread of AIDS, cancer, heart disease and other problems have saved untold thousands of lives by altering people's beliefs–and, ultimately, their behaviors.

Directing the same relentless force of public education against insurance fraud could inject a potentially game-changing ingredient in our decades-long efforts against this crime.

If insurers poured just a small fraction of the estimated $30 billion in annual fraud losses into public-outreach efforts, and reduced losses even by a small percent, the return would more than justify the investment.

The truth is that most anti-fraud outreach efforts today are fragmented and heavily underfunded. Fraud tends to be a second-tier outreach priority with most insurers. State agencies, departments of insurance and fraud bureaus generally have zero or few resources to educate the public as well.

Well-funded, campaign-caliber efforts are rare. Most outreach efforts are tactical grab-bags of news releases, news articles, Web site alerts and other basic tools–applied on an as-needed basis.

This is a weak formula for change. If America is backsliding in tolerance of fraud, as the coalition's research shows, then outreach efforts need extensive retooling.

Research to gauge whether standard anti-fraud messages work doesn't exist. It's possible we've been blowing hot air for decades while fraud losses keep piling up.

Most public messages are variations of these ideas:

o Insurance fraud costs everyone money.

o Don't do it–you'll go to jail.

But the "you'll go to jail" message may not scare people enough. Threats of hard time in a cold, lonely jail cell aren't necessarily strong deterrents.

So if our jailbird message may be so much smoke, how do we know the "costs everyone money" message works?

We don't.

Insurers need to invest more heavily in reaching out to insurance consumers to reverse entrenched and toxic attitudes. Solid research into effective anti-fraud messages supported by the full weight of well-targeted campaigns will better build the public backlash against fraud that virtually everyone agrees is needed to turn the corner on this crime.

We also must consider a unified national outreach campaign. If proven feasible, it would direct massive and sustained force against fraud throughout the nation.

In the end, public outreach isn't a cost center, it's an investment. Promoting the public welfare is good corporate citizenship, and even better business.

Dennis Jay is executive director of the Coalition Against Insurance Fraud in Washington, D.C. For more information, go to www.InsuranceFraud.org.