Insurance Fraud Statistics

14.10.2021
Stefan

Insurance can be an amazing tool to protect your assets and integrity. Unfortunately, given the nature of this type of contract, abuse and fraud are fairly common. That’s why we prepared a list of insurance fraud statistics to show you the dark side of this industry. Read on to stay in the loop of the most common schemes and cons people apply to take advantage of the insurance system at home and abroad.

Insurance Fraud Statistics (Editor’s Choice)

  • Insurance fraud costs Americans more than $80 billion annually. 
  • 76% of Americans are more likely to commit insurance fraud while the economy is declining than when it’s growing. 
  • In 2020, over 500 medical insurance scams were recorded. 
  • 94% of American businesses have worker’s compensation insurance. 
  • In Germany, insurance fraud costs around €4 billion ($4.67 billion) annually.

General Insurance Fraud Statistics

1. It’s estimated that insurance frauds cost American consumers over $80 billion per year. 

FBI estimates place the cost of non-health insurance fraud at $40 billion per year. To put things into perspective, this means that each American family loses between $400 and $700 per year in increased premiums.

(InsuranceFraud, MutualBenefitGroup)

2. Almost one in four Americans believe lying to an insurer is acceptable.

Just under a quarter (24%) of those surveyed by the Insurance Research Council said increasing a claim by a small amount to make up for deductibles is okay. Insurance fraud statistics also show that 10% of Americans think that insurance company fraud does not hurt anyone while 86% of them know that a fraudulent insurance claim leads to higher rates for everyone. Furthermore, 18% think increasing a claim to make up for premiums paid in previous years is also acceptable. 

(InsuranceResearch, GovInfo, InsuranceJournal)

3. 78% of consumers in a study are concerned about insurance scams.

The study also underscores the change in attitude toward scams. Insurance fraud statistics show that back in 1997, 93% of those surveyed believed it unethical to misrepresent a claim to obtain payment for an uncovered loss. Currently, 88% have the same opinion. Also, 84% of consumers think submitting an inflated claim is unethical compared to 91% in 1997. 

(InsuranceFraud, GovInfo)

4. 76% of people are more likely to commit insurance cons during an economic downturn. 

This compares to 66% back in 2003. A recent insurance fraud report further shows that 55% of US consumers think that poor service rendered by an insurance company is likely to cause customers to commit scams.

(Commerce)

5. The property and casualty insurance industry incurs yearly losses of $28.39-$34.45 billion.

Insurance fraud statistics reveal that the average loss over six years for this market is $31.33 billion. Estimates show that approximately 10% of losses in this industry are caused by scams.

(NICB) 

6. Insurance fraud cases amount to 5-10% of claims costs for the US as well as Canadian insurers.

Nearly a third (32%) of insurers claim that for them fraudulent activity amounted to 20% of their claim prices. More than 30% of companies say that fraud losses account for 10-20% of their claim volume. 

(Oracle) 

7. In 48 states insurance fraud is a specific crime. 

Oregon is the only state with no laws to cover insurance fraud schemes. Insurance fraud statistics by state further reveal that 43 states and the District of Columbia require insurers to report suspicious claims to the state bureau. It’s also interesting to note that 22 states registered counterfeit airbags officially among the legislated types of insurance fraud.

(InsuranceFraud)

8. Estimates place losses caused by fraud in the life insurance industry at around $10-20 billion per year.

However, operators have pinpointed the ratio of saving from preventing scams using detection and prevention software at three to one. On average, life insurance fraud companies saved $30 for every $1 spent on prevention tools. 

(RGare)

Auto Insurance Fraud Statistics

9. Auto insurance fraud produces $7.7 billion in losses a year.

Research suggests policyholders account for the bulk of fraudsters. Another study suggests that misreporting garaging addresses and youthful drivers causes $2 billion in premium leakage, reflecting illicit attempts by policyholders to obtain lower premiums. 

(YMAWS, ValuePenguin)

10. Over a fifth of consumers have lied to their car insurance provider.

Car insurance fraud statistics show that while 78% of consumers have reportedly never lied to their auto insurance company, 9% admit to having claimed damage and then pocketed the money without getting the vehicle repaired. Then, 8% have misinformed their insurer about the drivers in their household, the same number have lied about their address, 4% have overinflated the value of their stolen vehicle, 2% note they have lied about something else. 

(ValuePenguin)

12. 10% of auto claims between 2015 and 2019 from the US took place in Arizona. 

More auto glass claims are filled in Arizona than in states with much larger populations like California or Texas. This points to a spike in fraudulent activities since these claims are among the most common insurance frauds and have increased 26% over the last five years in the Apache State. 

(InsuranceFraud)

Health Insurance Fraud Statistics 

13. Health care fraud costs around $68 billion annually.

When you put this number into perspective, it represents 3% of the nation’s $2.26 trillion in public health spending. Other estimates go up to $230 billion lost to fraud, or as high as 10% of annual health care expenditure. 

(BCBSM, NCBI)

14. There were nearly 600 medical insurance frauds in 2020, according to health insurance fraud statistics.

Last year saw a recent record of 580 health care fraud cases prosecuted by the Department of Justice amid the ongoing COVID-19 pandemic, with the bulk falling under the False Claims Act. The DOJ additionally settled 265 claims under the FCA that year, which marked another record for the department. 

(JDSUPRA)

15. 2020 saw 134 billion in improper rates for Medicare and Medicaid. 

Medical insurance fraud statistics reveal that in the same year, improper Medicare payments amounted to $25.74 billion and represented 6.27% of the total. This marks a drop from the previous year when fraud insurance claims totaled $28.91 (7.25%). Meanwhile, Medicaid fraud amounted to $86.49 billion in 2020 (21.36%) and $57.36 (14.9%) in 2019.

(CMS)

16. Former customers of the Insurer Equitable Life had their policy values increase by 65% and 75% following the company’s demise. 

This is the most recent and hard-hitting scandal in the business insurance fraud landscape, private health insurance fraud statistics show. This entity has been under scrutiny in the last 20 years since it came close to a collapse. Back then, policyholders lost billions of pounds and the government had to compensate them with more than £1 billion ($1.35 billion). Besides this scandal, other small fake insurance companies pop up occasionally, but they are usually closed in time by the authorities. 

(FT)

17. In 2018, $3.2 billion worth of improper payments were made to the home health Medicare category.

This represents 17.6% of the total Medicare improper payments. A breakdown by category shows that durable medical equipment represented 35.5% ($2.6 billion), hospice accounted for 1.7% ($2.1 billion), laboratory cost 28.2% ($1 billion), and all other services came in at 8.1% ($31.6 billion).

(Admere)

Worker Compensation Fraud

18. 94% of American businesses have worker’s compensation insurance. 

To put things into perspective, insurance fraud statistics for the US show that 135,000,000 workers from the country are covered. Most of the claims employers face are, indeed, legit. However, 1-2% of them are fraudulent. 

(Employers)

19. Currently, 10% to 30% of employers misclassify their employees as contractors to pay less insurance. 

Between 2000 and 2007, the number of misclassified employees by their bosses grew from 106,000 to 150,000. The numbers have been on the rise since. Estimates show that currently millions of workers are involved in such schemes. 

(Nelp, CBSLocal)

20. More than one in 10 small businesses are afraid their workers will defraud them.

Insurance fraud statistics show that 13% of entrepreneurs worry that employees will fake an injury or illness to receive worker’s compensation. This is not surprising when we consider that worker’s compensation fraud amounts to $30 billion annually in the United States. What’s also worrying is that one in five business owners does not know how to identify this type of scam. As a side note, 36% of homeowners say that when they look for a contractor, fraud is their biggest concern. 

(BusinessWire, Insurance.ca, RuralMutual, McGriff)

Global Insurance Fraud Statistics

21. In Germany, the cost of insurance fraud per year is estimated to exceed €4 billion ($4.67 billion). 

In Germany, claims adjusters get annual training to learn how to detect and combat fraud. The training is conducted by insurance industry practitioners, legal advisors, technical specialists, police experts, and medical scientists. Claims adjusters can take an exam after to acquire a certificate. 

(InsuranceEurope) 

22. Under French law, insurance scams are punishable with up to five years in prison. 

Insurance fraud statistics for Europe and France, in particular, show that fines for this crime may also get as high as €375,000 ($438.583). In 2018, health insurance fraud in this country amounted to €261.2 million ($305.49 million) while in 2017 it spiked to €270 million ($315.79 million). 

(Detectives, Statista)

23. In 2019, British insurance companies had to deal with 300 scams per day. 

This means that according to insurance fraud statistics for the UK, companies had to face an illicit attempt every five minutes. All this added up to 107,000 illegal claims, marking a 5% increase from the previous year. Some of the most common insurance fraud examples in the country are related to arson, and theft, or burglary.

(Abi)

24. New Zealand’s Insurance Fraud Bureau estimates that 10% of the country’s written premiums are fraudulent. 

This means that in 2020 alone, both policyholders and insurers lost around $739 million, or about $398 per household. It’s no wonder that premium costs in the country have been on the rise. 

(InsuranceBusiness)

25. Canadian taxpayers incur costs of $1.6 billion annually on auto insurance fraud.

In Ontario, the average auto insurance premium stands at $1,700 which is 55% higher than the average in all other jurisdictions. Insurance fraud statistics for Canada show that about 20% of all claims in the country contain at least an element of fraud. 

(InsuranceInstitute)

26. Insurance agent frauds in South Africa amounted to approximately $497 million in 2019.

This figure represents roughly 20% of all the claims reported in the country, which are valued at $2.4 billion. The most common illicit activities are false claims or misrepresentations of risks while underwriting. Unintentional frauds also take place, unfortunately. Moreover, as insurance fraud statistics for South Africa show, the mounting financial pressure exhibited on consumers is likely to drive fraud attempts even higher. 

(Atlas-Mag)

27. 10% of total motor car claims from the Philippines are estimated to be illicit.

The total assets of the insurance industry in the country were worth P1.56 trillion ($30.54 trillion) in 2017. Emerging markets like this one are geared towards rapid growth, but amidst this, an unprepared landscape could also incur massive losses caused by illegal activity. 

(GlueUp)

28. Health fraud in India represents approximately 15% of total claims.

As insurance fraud statistics for India reveal, the healthcare industry in the country loses somewhere between Rs.600 and Rs.800 crores ($80.83 million–$107.78 million) each year because of scams. 

(InsuranceInstituteOfIndia)

FAQ

What is the largest area of fraud identified by the insurance industry?

Although it’s hard to pinpoint an exact number, health care fraud costs around $68 billion annually which is, without a doubt, the largest area of fraud. 

(InsuranceFraud)

How does insurance fraud create higher overall prices for everyone?

Unfortunately, all consumers pay the price of fraud. Since the companies are losing money, they will raise premiums and rates to make up for them. 

Is insurance fraud a federal crime?

Insurance fraud is considered a federal crime by federal prosecutors. Moreover, since most cases are complex, they usually involve many other unlawful activities, along state or federal lines. 

What is the maximum penalty for insurance fraud?

Insurance fraud statistics show that the highest form of punishment mandated by law consists of up to five years in prison and a $50,000 fine (or double the fraud amount).

References: InsuranceFraud, MutualBenefitGroup, InsuranceResearch, GovInfo, InsuranceJournal, Commerce, NICB, Oracle, RGare, YMAWS, ValuePenguin, ValuePenguin, BCBSM, NCBI, JDSUPRA, CMS, FT, Admere, Employers, Nelp, CBSLocal, BusinessWire, Insurance.ca, RuralMutual, McGriff, InsuranceEurope, Detectives, Statista, Abi, InsuranceBusiness, InsuranceInstitute, Atlas-Mag, GlueUp, InsuranceInstituteOfIndia, Shouselaw

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