Uncovering the True Impact of Insurance Fraud at 2023 CLM Focus Conference

The 2023 CLM Focus Conference session titled ‘Victimless Crime? Think Again: Insurance Fraud and Understanding the Issues’ challenged the misconception of insurance fraud as a harmless act. Experts Andy Guerra, Bryant Hall, Jennifer Provost, and Nick Sansone delved into the definition, types, and impacts of insurance fraud, emphasizing its substantial cost and victim impact.

The panelists highlighted the staggering cost of insurance fraud, estimated between $40 billion to $60 billion annually, excluding medical insurance fraud. This fraud elevates insurance rates, with the FBI estimating an average increase of $400 to $500 per year per person. Sansone outlined two primary types of fraud: hard fraud, involving deliberate fabrication like staged accidents, and soft fraud, involving exaggeration or opportunistic lies, like misrepresenting health conditions on insurance applications.

The most prevalent insurance fraud type, according to the FBI, is staged accident claims, often involving innocent parties. Sansone recounted a case in Philadelphia involving a fabricated bicycle-car collision, illustrating the complexities of proving fraud. Another striking example shared by Hall involved a fraudulent burn injury claim, uncovered through simple internet image searches.

Despite clear evidence of fraud in many cases, the panelists noted a significant challenge: the lack of legal consequences. Often, fraudulent claims are not prosecuted due to the high cost and effort involved, encouraging more such crimes. The session also touched on other forms of insurance fraud, including dishonest life insurance applications, property damage claims, attorney fraud, falsified claims, workers’ compensation issues, inflated medical bills, and failure to pay claims properly.

The session concluded by stressing the importance of recognizing insurance fraud’s real impact on the industry and policyholders, debunking the myth that it is a victimless crime.