The average U.S. household pays an extra $4,000 to $7,000 in premiums each decade thanks to insurance fraud, the FBI estimates. (Credit: Shutterstock)
Younger generations of insureds are less likely to be concerned about insurance fraud than their older counterparts, regardless of the way fraud influences overall insurance costs. The average U.S. household pays an extra $4,000 to $7,000 in premiums each decade thanks to fraud, the FBI estimates. Homeowners premiums are already up across the country and many are already struggling to make room for coverage in their budgets, so these increased costs can make a significant impact on households.
A study from the University of Georgia recently analyzed data from a Coalition Against Insurance Fraud survey. The Coalition questioned around 1,500 adults about their thoughts on insurance claims, and survey participants were presented with various scenarios to see if they would either participate or turn a blind eye to different types of insurance fraud.
Two-fifths of respondents between ages 25 and 34 told the Coalition that they were OK with the actions taken in the fraudulent scenarios. Only about 5% of those ages 55 and older said they were comfortable with participating in these actions.
The most acceptable instances of fraud among survey participants were those in which an insured includes damages that happened previously on a current homeowners claim, which 35.8% admitted they might, would or have done; while 22.2% said they know someone who has done this. When it comes to auto insurance, 34.3% admitted to accepting or participating in adding older damages to a claim.
“Many people, especially younger people, have an adversarial relationship with insurance companies,” Brenda Cude, lead author of the study and a professor emerita in the UGA College of Family and Consumer Sciences, told UGA Today. “If you’re pushed into a position of thinking you need to fight, maybe that pushes people into actions that they wouldn’t otherwise consider, especially if they’re not aware that it’s technically illegal. There are lots of major consequences that could come from that.”
Other examples of fraudulent behavior that insureds admitted they might, would or have participated in include:
- Leaving out information or providing false information on an insurance application to get coverage or a lower premium (31.2%)
- Adding a few items when filing a claim (30.7%)
- Giving misleading information to get insurance coverage (29%)
- Giving an address in an area with lower auto insurance premiums (28.1%)
- Submitting a claim for an off-work recreation injury to workers’ compensation (27.2%)
- Purchasing insurance after an accident (27%)
The study from UGA suggests one solution to the acceptance of insurance fraud among younger customers is education. It references a survey from Value Penguin in which a quarter of Gen Z respondents said they do not believe insurance fraud affects them. Other similar studies and surveys have suggested that policyholders sometimes feel justified in breaking rules in the underwriting or claims process that they view as unfair or unjust.
The UGA report states, “A better understanding of insurance underwriting and claims investigation practices would directly affect knowledge and also influence attitudes and behaviors, which are critical as all three are components of financial literacy.”
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