Insurance fraud is considered as one of the major risks in the business industry as well as one of the most serious criminal offenses. Criminal acts in insurance may involve various types including automobile property, worker compensation, life insurance, personal injury, residential and commercial property claims as well as health insurance. Insurance fraud has negative effects on society and the economy. Companies and government actors are doing their best to detect insurance scams, to prevent them and put an end to them.
Fraud has a negative impact on the insurance sector including the loss of billions of dollars. Insurance scams result in considerable costs for individuals, businesses, and governments. Insurance fraud is spreading at a significant level and can sometimes involve a high level of violence like murder. Insurance frauds can result in financial costs to families, lost jobs, indignity and mental suffering. It is estimated by the Coalition Against Insurance Fraud that insurance fraud costs the American Economy at least $80 billion per year. This money could be easily spent on salaries for American workers, tuition for university, personal income taxes, healthcare reform, infrastructure, new homes, cancer research, etc.
Criminal law has special regulations and penalties that punish against insurance fraud. Many states have enacted anti-fraud laws that push for stiffer sentences against offenders. These laws allow victims to express the nature of these crimes to judges and in courtrooms. Several states have their own fraud bureaus to investigate on suspicious insurance scams. These fraud bureaus employ a significant number of investigators whose specialty is to detect insurance scams (National Insurance Crime Bureau, 2004). The budget allocated to these bureaus amounts to approximately $150 million and is funded by insurance companies and general government funds. Many of these fraud bureaus enjoy full police authority and some of them have a civil fining power. Their jurisdiction may be limited to some insurance fraud types or all types (The Official Website of the Coalition Against Insurance Fraud).
Insurance companies have been actively involved in the campaign against insurance fraud to cut their losses. Insurance companies invest a part of their capital in special investigation departments, civil suits against criminal scammers and the use of technology to identify insurance scams. Technology has played an important role in conducting investigations in a prompt manner and provided insurers with more trust in their anti-fraud policies which is a key point in preserving business assets and policyholder standards. Technology has allowed for automated processes that have become a major part of insurance companies’ systems. These systems went beyond the failure phase that was experienced many years ago and have evolved to include sophisticated methods to prevent and detect fraud. Still many companies have to replace their old systems and invest fully in technological methods. The technological involvement of the government in insurance programs will further reduce the costs in the future (The State of Insurance Fraud Technology, 2012).
In addition to using special investigation departments, filing civil lawsuits, sophisticated technologies and fraud bureaus, training people and staff on detecting fraud and preventing it from happening remains one of the most important means to combat insurance scams.
“Insurance Related Crimes. The Impact of Insurance Fraud”. National Insurance Crime
Bureau. 17 May, 2004. 23 Nov. 2013.
“The Impact of Insurance Fraud”. 23 Nov. 2013.
“The State of Insurance Fraud Technology. A Study of Insurer Use, Strategies
and Plans for Anti-fraud Technology”. The Coalition Against Insurance Fraud. September, 2012. 23 Nov. 2013. <http://www.insurancefraud.org/downloads/techStudy_2012.pdf>