Fraud Increases In '09; Bureau Budgets Tighten

NU Online News Service, Jan. 11, 3:35 p.m. EST

Due in large part to the struggling economy, insurance fraud of all kinds increased in 2009, and many fraud bureau budgets and positions were cut, according to a report by the Coalition Against Insurance Fraud.

The Coalition interviewed 37 fraud bureaus during the first three weeks of Oct. 2009 for its survey, titled "The Economy and Fraud Fighting on the State Level." The bureau directors were asked for their views on trends in 15 areas of fraud, which include staged auto accidents, auto give-ups, padding auto and homeowner claims, arson, and workers' compensation fraud by both workers and employers.

The Coalition said the largest increases in fraudulent activity were found in the areas of bogus health plans, drug diversion and fraud by insurance agents. The smallest increases were seen in staged auto accidents, life insurance fraud and workers' compensation fraud by employers.

All 15 categories showed more bureaus reporting increases in activity versus decreases.

For bogus health insurance, which saw the greatest rise in activity, the Coalition pointed to the "reported rise in unauthorized entities selling fake coverage combined with the emergence of medical discount plans" as the reason. Thirty-eight percent of respondents said this type of fraud was "much higher" in 2009, while 19 percent said it was "slightly higher." Only 6 percent said it decreased.

Regarding agent fraud, the Coalition said 69 percent of respondents pointed to slight or significant increases in activity in 2009. Only one bureau cited a decrease.

Workers' comp fraud committed by employers increased by the least amount, which the Coalition said is "counter-intuitive."

Speaking to the possible reasons for the lack of a spike in referrals by insurers, the Coalition said, "At least one large fraud bureau reasoned that insurers may be eager to keep the business during a recession and are working with employers to make 'premium adjustments,' rather than reporting them for premium fraud."

Even as all 15 fraud categories showed increases in activity, more than a third of fraud bureaus reported reductions in their 2009 budgets, and 35 percent reported they were not allowed to fill empty positions.