Is Insurance Fraud Still a Problem?

A picture of an ink pen laying with multiple forms and paperwork.

Insurance fraud has been a serious issue in the insurance industry for several decades. Every year fraud adds hundreds of dollars in premium to insurance policies for Minnesota’s policyholders. In the 1990s, many state legislatures began requiring insurance companies to have an Anti-Fraud Plan, which required investigating and reporting all insurance fraud to proper governmental authorities. To help fight fraud, insurance companies began designating specific personnel to fight this crime, and these individuals were called “special investigators”.

Twenty years later, insurance fraud still flourishes in most states. It is the second-largest white collar crime in the United States (with tax evasion being the largest). Despite legislative and insurance companies’ anti-fraud activities, insurance fraud still remains a serious problem due to two major challenges: (1) the difficulties of a fraud investigation, and (2) the fact that insurance fraud, on many fronts, is now organized.

First, an insurance fraud investigation generally involves proving a negative, meaning what has been claimed didn’t actually happen. Another way of stating this is the burden of proof is on the insurance company to prove what a claimant states is or isn’t true. The success of an investigation relies heavily on the honesty and memory of witnesses and the availability of fact data (e.g., surveillance tapes, cell phone records). The evidence needed for an insurance company to deny a claim because of fraud should be of the same stature that would convince a jury of a crime.

The second reason fraud remains an issue is that it’s now organized. In the area of auto accident injuries, the insurance industry is challenged by a system where some participant medical providers and attorneys work together to obtain every dollar available in the insurance policy. Whether or not an injury was actually sustained is rarely a consideration.

Unfortunately, insurance fraud remains a serious problem that doesn’t show signs of slowing down. For more information on insurance fraud, we recommend visiting the following sources: