Looks like the recession is having a major impact on the insurance business, by increasing the amount of fraudulent insurance claims.  The Association of British Insurers (ABI) recently announced stats that show as many as 2,000 dishonest insurance claims are made every week, carrying a price tag of roughly 14 million pounds.  This new rate is an increase of roughly 17% when compared to 2007. 

What segment of insurance do you think logs the most fraudulent claims?  If you guessed home insurance, you are correct.  In 2008, nearly 55,000 false home owner claims were logged.  That said, the most expensive dishonest claims were from car insurance policyholders.  The daring auto owners tried to claim 360 million pounds of fraudulent damages.

Excluding life insurance, the ABI reported that 4% of all claims in 2008 were fraudulent.  This data represents a 1% increase over a year earlier. 

The question here is, does this surprise anyone?  If the people trying to defraud the insurance companies see this practice as a way to make a quick buck, why wouldn’t this practice increase during a recession? 

Many people believe that insurance fraud is a victimless crime, but that is far from the case.  In the U.K., fraudulent insurance claims cost the insurance industry more than 1.6 billion pounds a year (with 42% of those caught noting that their policy was too high, justifying the fraud) and may add as much as 5% to every policyholder’s premiums.  The FBI reports that the total cost of insurance fraud is “estimated to be more than $40 billion per year,” translating to between $400 and $700 for each U.S. family. 

According to the Coalition Against Insurance Fraud, the largest type of insurance fraud in the U.S. was medical, with business insurance fraud falling low on the list.  However, of the classifications of business insurance fraud in the study, arson was the greatest.  

When someone argues with you that insurance fraud is a victimless crime, make sure to ask them if their insurance premiums have gone up.  If that is the case, then they have been a victim of insurance fraud – and one of the oldest misconceptions in the insurance industry.