With a $120 billion annual price tag, insurance fraud is one of the costliest crimes in America. Progressive Insurance recently conducted a telephone survey on more than 31,000 Americans to better understand how people feel about fraud and other indiscretions.
The survey, conducted in May and June 2001, asked respondents not only how likely they would be to commit insurance fraud and other indiscretions if they knew they would not be caught, but whether they would report someone they knew who had committed fraud.
The results indicate that while most respondents are honest, a relatively small percentage are willing to cheat and commit these crimes. According to the survey:
– 9 percent of all respondents said they would commit insurance fraud if they knew they would not be caught.
– 29 percent of respondents said they would never report insurance fraud committed by someone they knew. Respondents were four times more likely to say they would report someone if there was a monetary reward of up to $500 than if there was a reward of only $250.
– 6 percent of respondents would report fraud only if they didn’t like the person who committed it.
Commenting on the survey results, Tom Kaschalk, national special investigations unit (SIU) leader for Progressive, stated: “Consumers and agents alike should be outraged by insurance fraud. While it’s good to see that a majority of survey respondents say they do not commit insurance fraud, the fact is that insurance fraud costs the American public billions each year. Insurance fraud is the second most costly white-collar crime in America. Only tax evasion is more costly. And it’s the honest consumer who’s paying for it. All Americans need to be aware of fraud, be willing to report it when they suspect it and be willing to get involved to stop it.”
What is the effect of insurance fraud on the industry, and on the average family? According to a 1996 study by Conning and Company, insurance fraud costs the industry $120 billion per year – and $20 billion in property and casualty alone. This translates to about $250 in additional premium the average American family has to pay every year to subsidize these fraudulent activities. In response, many insurance companies are working to combat these costly crimes. Progressive’s 170 SIU professionals work with law enforcement agencies, the NICB, and each state’s department of insurance to prosecute perpetrators of insurance fraud. Along with four other insurance carriers, Progressive has filed four Federal Racketeer Influenced and Corrupt Organization (RICO) civil suits citing 120 individuals and medical providers with perpetrating fraud and seeking more than $130 million in restitution.
Agents can play a critical role in this fight. The most common types of fraud include; misrepresentation on the insurance application, “paper” accidents and car thefts, staged and/or caused accidents, re-VINed autos, and rate evasion. Here are some things agents can do to help uncover common fraud indicators:
– Request two forms of identification from the applicant.
– Request a social security number from the applicant.
– Ask to inspect the applicant’s vehicle to see if it really exists.
– Verify the applicant’s employment.
– If the applicant is unemployed, verify income (disability slip, income slip, etc.).
When in doubt about anything, contact the carrier before assuming the risk. Call the National Insurance Crime Bureau (NICB) at 1-800-TELL-NICB to report cases of fraud.
Additional fraud-fighting information is posted on Progressive’s agent-dedicated website, ForAgentsOnly.com (FAO).
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