I saw an article today in Insurance Journal that was interesting to me as an insurance professional in the great state of Florida. The article discussed a case on insurance fraud in Florida related to Hurricane Irma.
A Florida man is arrested for insurance fraud over a $225 claim for damage to his vehicle related to Hurricane Irma.
I can almost hear you, why is the state focusing on a $225 claim? Can’t they just let that slide and go after some hard-core fraudsters? I think it’s important that the state prosecute this particular fraudster, and any of (possibly) hundreds of others that they may be investigating for similar cases. Yep, I think it’s as important for any state, but particularly Florida, to prosecute these small-time fraud cases. Let me lay out my case before you start to disagree with me.
Case Study – NYC
Rudy Giuliani first became Mayor of New York City in 1994. As Mayor, he worked with his police commissioner to work to lower the crime rate in the city. The prior mayor started a program to clean up the streets of New York, starting with those guys that would panhandle by trying to clean windshields of cars stuck in traffic. Giuliani expanded on that particular crack down by aggressively policing several minor offenses, including graffiti, other panhandlers, and turnstile jumping (among others).
Supporters of the program believe that this crack down on these sorts of crimes created an atmosphere where people believed that crime was not going to tolerated under this new administration. The overall crime rate in the city dropped noticeably over the years that this program was in place.
Let’s apply that to the real problem of insurance fraud (especially in Florida). When the state decides to investigate and prosecute the small-time insurance fraudster, and loudly publicizes it? Our friend from the story I read gets arrested and the court imposes a penalty (I’m in favor of a hefty (no, really, a HEFTY) fine). That’s when the press gets involved. As soon as that story gets picked up by a major paper or website, the world knows. That puts others on notice and (potentially) slows this level of fraud down and puts the big-time fraudsters on notice that the state is paying attention to them, too.
It’s not what you CAN see that’s important
Yep. The state just let us know that they are working hard on these really simple cases. You might say that we’re getting to see them picking the low hanging fruit. Here’s what I keep in mind. What aren’t we seeing? What we aren’t seeing yet, are the in-depth investigations that are taking place behind the scenes. This was a simple one and not the last one in my opinion. The carrier saw something funny, probably investigated most of it themselves, and sent it to the state.
Carriers have investigators. The states have investigators. Both have data that is being mined by software and people. All of that leads us to one more conclusion. Even while we are seeing the state pick off that low fruit, they are building ladders to pick off the fruit higher up the tree. In fact (trying not to mix metaphors), they are sharpening chainsaws to cut down some trees.
Let’s be honest, many of us read articles like this and feel tempted to mock the state because they’re taking on such small-time fraudsters. However, I maintain that it only seems small-time because the big-time fraudsters are so big. Actually, our response ought to be gratitude because these operations work together to help keep insurance premiums down for all of us. Insurance fraud doesn’t hurt carriers. It hurts all of us that have to buy insurance.