Survey shows companies are concerned with growing prevalence of insurance fraud
The results of a new survey have been released by FICO, an analytics firm, concerning the prevalence of insurance fraud in the U.S. and Canada. The survey suggests that insurance companies are expecting to see higher losses from fraud on personal insurance lines. Insurance fraud appears to be growing more common in both countries despite aggressive regulations being adopted that are meant to mitigate the impact of such practices.
Insurers expect to see higher losses from fraud this year
According to the survey, 57% of U.S. and Canadian companies expect to see higher losses from insurance fraud this year. One in three of these companies claimed that there is not enough protection against fraud when it comes to premium leakage and new applications. Approximately 20% of insurers believe that predictive analytics could help mitigate the growth of insurance fraud, but only 7% believe that regulations targeting known types of fraud would be a viable option.
Cost of insurance fraud on the rise
The survey shows that 35% of companies estimate that insurance fraud costs account for 5% to 10% of their total claims, and 31% of insurers claimed that these costs were as high as 20%. The survey shows that the financial impact of insurance fraud are most apparent in the U.S. In New York, Pennsylvania, and New Jersey, insurance fraud is quite common. Fraud is also prevalent in Quebec and Ontario in Canada.
No-fault states could encourage fraudulent activity
As expected, 63% of insurers believe that there is an increased risk of fraud in no-fault states in the U.S. These states are typically home to regulations that hold insurance companies accountable for medical costs and other expenses regardless of where the fault may lie. These regulations typically focus on auto insurance, which has made this sector quite popular for those committing insurance fraud. Fraudulent claims often mean significant losses for insurers, which translate into higher premiums for consumers in general.