Insurance fraud — the $100 billion problem that affects us all

Insurance fraud. It’s a phrase we’ve all heard, but most of us know very little about it.

What is it? Where does it happen? What does it mean? And how does it affect me?

What is it?

According to Wikipedia, insurance fraud is “any act committed with the intent to obtain a fraudulent outcome from an insurance process.” That’s a pretty wide definition!

This means fraud can happen at multiple places along the line in the process of the business of insurance.

Where does it happen?

It can happen almost anytime and anywhere:

  • When a person is applying for insurance and is not truthful on their application.
  • When a person submits a claim to an insurer and is not truthful about the basis for that claim or the damages being claimed.
  • When a person who works for an insurer or agency is not truthful about the way they are handling the process of insuring someone.

What does it mean?

What these acts of dishonesty mean is that insurance companies have to fight dishonesty on multiple fronts and that they cost companies billions of dollars a year.

Yes, billions.

In California, insurance fraud ranks second in non-violent crimes. It has become such an issue that insurance fraud is a felony in 45 states. Almost every state’s Department of Insurance has a fraud bureau working to investigate, track, and fight insurance fraud in the state. Insurers and the states work together, tackling these issues one-by-one.

How does it affect me?

As you can imagine, any problem so widespread that costs an industry $100 billion dollars is going to have a major impact. And that impact comes in increased premiums getting passed along to policyholders, increased medical care costs, increased auto body fees — and the list continues.

What can you do?

Keep an eye out for these fraudsters. If you suspect insurance fraud at any level, report it to your state Department of Insurance immediately.

Anyone can call Grinnell Mutual's Fraud and Compliance hotline at 855-467-2372. Our Fraud and Arson Award program provides up to $10,000 for providing timely and credible information — that results in a conviction — about a fraudulent or criminal loss to people or property insured by Grinnell Mutual or its affiliated farm mutuals. It’s our way of saying thank you for doing the right thing.

Disclaimer

The information included in this publication was obtained from sources believed to be reliable, however Grinnell Mutual Reinsurance Company and its employees make no guarantee of results and assume no liability in connection with any training, materials, suggestions or information provided. It is the user’s responsibility to confirm compliance with any applicable local, state or federal regulations. Information obtained from or via Grinnell Mutual Reinsurance Company should not be used as the basis for legal advice or other advice, but should be confirmed with alternative sources.