Blog Authored by: Ken Mogren, CPCU
It’s Insurance Fraud Awareness Week in Minnesota, but that’s nothing to celebrate. Insurance fraud hurts us all, even though we hardly notice the pain. Every time we pay an insurance bill, we’re handing over money that will find it’s way into the pockets of people who abuse the system.
While many insurance bills break down the premium so you can see the cost of the coverages you’ve purchased, they don’t break out the cost of fraud. It’s imbedded in your premiums. If it was a separate line item, you would be outraged.
How big is the problem? $80 Billion nationally. That number doesn’t mean much until it’s put in perspective. One way of looking at it is to compare it to the cost of shoplifting. We all know we pay more at the store because retailers invisibly pass on their shoplifting losses to consumers in the form of higher prices. So do insurance companies, but the cost to the public for insurance fraud is about 6 times higher than the cost of shoplifting. It works out to an average of about $1000 per year for each US family. Even if your insurance needs and costs are low, remember the cost of insurance fraud is imbedded in the prices of everything you purchase because the providers of all goods and services price their insurance costs into what you pay.
Why aren’t the jails full if it’s such a big problem? While some professional criminals do get busted, much of the cost come from normally law biding folks who abuse the system in ways they don’t even think of as crimes. Padding a claim or fibbing a bit on applications for insurance is where much of the cost to insurers happens and this cost ultimately gets shared by everyone in society.
To read more about insurance fraud, including some great stories about dumb crooks who got caught, check out www.insurancefraud.org.