In 1995 the Coalition Against Insurance Fraud estimated the annual cost of insurance fraud at $80 billion. This estimate has been cited for over 25 years with no update for inflation or recognizing its limitation to property and casualty insurance. Now the Coalition has released a new study broadened to cover all lines of insurance.
The study was conducted with input from insurance trade and research groups, government and non profit organizations. It was prepared by the Colorado State University Global White Collar Crime Task Force. The full report, "The Impact of Insurance Fraud on the U. S. Economy" is available online at www.insurancefraud.org.
The report includes explanations of methodology, shortcomings and limitations (it's based on previous research rather than new findings), recommendations for future study, and references.
The bulk of the report is an analysis by line of business, stating the nature of the problem, existing data and calculation of fraud estimates. Lines of business are
- Property and casualty. The Insurance Information Institute estimates fraud accounts for 10% of loss and loss adjustment expenses, $38 billion annually. The FBI's estimate is $40 billion and the Insurance Research Council estimated $5.6 billion-$7.7 billion in auto bodily injury fraud. The study estimate is $45 billion annually.
- Workers compensation. Including claimants, employers and medical providers, 16% of claims or $9 billion are fraudulent. Premium fraud is $25 billion, for a total of $34 billion for this line.
- Premium fraud. Based on a Verisk study of auto premium fraud updated for inflation, cost is $31.6 billion. A Reinsurance Group of America survey resulted in an estimate of $38.7 billion. Averaging the two, the study's estimate is $35.1 billion.
- Healthcare. Using National Healthcare Anti-Fraud Association minimum estimate of 3% fraudulent claims and CMS total healthcare spending less Medicare and Medicaid, fraud costs $36.3 billion.
- Medicare and Medicaid. Estimates range widely; the study averaged AARP estimate of $60 billion and Government Accountability Office $77.4 billion for its estimate of $68.7 billion.
- Life insurance. Key fraud organizations estimate 10% of claims and benefits are fraudulent, amounting to $74.7 billion.
- Disability insurance. There are many inconsistent definitions and measurements. The study used Social Security disability overpayments updated for inflation for their estimate of $7.4 billion.
- Auto theft. The FBI's Uniform Crime Report does not differentiate between crime and insurance fraud, but their estimate of $7.4 billion is the best available.
In total, these estimates add up to $308.6 billion annually.
The study is intended to assist policymakers, companies, agencies, government entities and the public to gain a clearer understanding of the nature and scope of insurance fraud, and to stimulate further research into each line of business.