In recent years we have observed a transition from probative investigations conducted in the field by professional claim representatives, to cursory file handling, in “boiler room” type call centers, often many states away, by claim data handlers who ae judged only on how many phone contacts they can make each hour. They typically lack the benefit of any local familiarity with the claim locality.
The fraud perpetrators are appreciative of this new environment, and unlike the insurance companies, they will work to enhance their skills to take advantage of the indifference of the P/C insurers.
I would wager that if you stop by your local police or fire department, the detectives or fire marshals may have never heard of the NICB, let alone know the name or contact information for their area NICB field agent.
Insurers seek the course of least resistance, and it is much easier to wash fraud costs into the rate base, than diligently investigate their losses.
Why would a company spend hundreds to investigate a claim only worth hundreds? You could pay two claims for what it would cost to investigate and pay one. Now, when the claim value is higher, it becomes worth it. Fraud in many cases is hard to prove and its just easier to pay and move on.
But, not for nothing, i would expect higher % of fraudulent claims when unemployment is high and home values are dropping. If they could break this down by region and compare to unemployment and property value decreases, that would be meaningful data.
As an agent, I have seen numerous cases of inadequate investigation of claims. Many carriers use independent adjustors and often the reports are incomplete and don’t investigate what they should. Subrogation departments often don’t do their job on recovery, especially on claims under $50,000. Of course, the insured and the agent gets charged on the loss experience. Fraudulent claims are on the rise due to the economy, particularly with arson. We spend a fair amount of time holding the company’s feet to the fire to get a decent resolution to a claim.
We’re talking “morale hazard” here folks. If there weren’t dishonest people in the world, insurance companies wouldn’t have to worry about identifying them. All the comments about insurance companies not doing their job and making it easier is anecdotal to the problem.
Despite the economy, there are many people who would never think of cheating and stealing via phony claims because they have some modicum of integrity and honesty. How dare people perpetrate fraud just because things are tough. They’re breaking the law. There are plent of social agencies services to help them out short of stealing from the premiums of others. This behavior should never be condoned. If it is, what’s next, breaking into homes and businesses? Maybe the solution is for everyone to own a 9mm.
I think you mean “moral hazard”. Morale hazard is an increase in the hazards presented by a risk arising from the insured’s indifference to loss because of the existence of insurance. Moral hazard refers to the Insured’s character.
I think to a degree you are right about most people being honest, however, the data would indicate a higher % of fraudulent claims during economic downturns, but this refers to a small portion of our society “on the fence”. Crime of opportunity if you will. Kind of like homedepot locking up expensive merchandise. Most, if not almost all of the customers wouldn’t consider stealing, but they secure high theft items to keep opportunity for loss down. Opportunity being the key word.
Anywho, thats just my two pennies. Have a great day.
In recent years we have observed a transition from probative investigations conducted in the field by professional claim representatives, to cursory file handling, in “boiler room” type call centers, often many states away, by claim data handlers who ae judged only on how many phone contacts they can make each hour. They typically lack the benefit of any local familiarity with the claim locality.
The fraud perpetrators are appreciative of this new environment, and unlike the insurance companies, they will work to enhance their skills to take advantage of the indifference of the P/C insurers.
I would wager that if you stop by your local police or fire department, the detectives or fire marshals may have never heard of the NICB, let alone know the name or contact information for their area NICB field agent.
Insurers seek the course of least resistance, and it is much easier to wash fraud costs into the rate base, than diligently investigate their losses.
Why would a company spend hundreds to investigate a claim only worth hundreds? You could pay two claims for what it would cost to investigate and pay one. Now, when the claim value is higher, it becomes worth it. Fraud in many cases is hard to prove and its just easier to pay and move on.
But, not for nothing, i would expect higher % of fraudulent claims when unemployment is high and home values are dropping. If they could break this down by region and compare to unemployment and property value decreases, that would be meaningful data.
As is, this article doesn’t do me any good.
Amen Boondoggle
As an agent, I have seen numerous cases of inadequate investigation of claims. Many carriers use independent adjustors and often the reports are incomplete and don’t investigate what they should. Subrogation departments often don’t do their job on recovery, especially on claims under $50,000. Of course, the insured and the agent gets charged on the loss experience. Fraudulent claims are on the rise due to the economy, particularly with arson. We spend a fair amount of time holding the company’s feet to the fire to get a decent resolution to a claim.
We’re talking “morale hazard” here folks. If there weren’t dishonest people in the world, insurance companies wouldn’t have to worry about identifying them. All the comments about insurance companies not doing their job and making it easier is anecdotal to the problem.
Despite the economy, there are many people who would never think of cheating and stealing via phony claims because they have some modicum of integrity and honesty. How dare people perpetrate fraud just because things are tough. They’re breaking the law. There are plent of social agencies services to help them out short of stealing from the premiums of others. This behavior should never be condoned. If it is, what’s next, breaking into homes and businesses? Maybe the solution is for everyone to own a 9mm.
I disagree. You need more stopping power than a 9mm.
Why not be very safe and use a 44 Magnum? They can make your day with that weapon.
I think you mean “moral hazard”. Morale hazard is an increase in the hazards presented by a risk arising from the insured’s indifference to loss because of the existence of insurance. Moral hazard refers to the Insured’s character.
I think to a degree you are right about most people being honest, however, the data would indicate a higher % of fraudulent claims during economic downturns, but this refers to a small portion of our society “on the fence”. Crime of opportunity if you will. Kind of like homedepot locking up expensive merchandise. Most, if not almost all of the customers wouldn’t consider stealing, but they secure high theft items to keep opportunity for loss down. Opportunity being the key word.
Anywho, thats just my two pennies. Have a great day.