An unsettlingly large number of people tolerate insurance fraud, and those numbers appear to be growing. This greatly complicates the work of claims professionals who every day must separate out honest claims from the large numbers of smoke-and-mirror cons by cheaters.
Claims professionals have an opportunity to increase their involvement in educating both consumers in their local communities and fellow insurer employees about the high price everyone pays for fraud. But right now public outreach is fragmented, underfunded and lacking in coordination. The industry needs a national game plan to turn public attitudes against fraud, steer people clear of this crime, and gain the upper hand.
Fraud steals, conservatively, $30 billion a year in property-casualty money. A national outreach campaign that saves even a small fraction of the $30 billion would generate a return on investment that would easily justify the expense.
Research into people's attitudes toward fraud suggests America faces a moral backslide that is draining insurers and policyholders. A 2010 survey by Accenture found that:
- More than two thirds of consumers say they believe insurance fraud occurs because people believe they can get away with it, up from 49% in 2003
- Consumers believe insurance fraud occurs because of people's need for money (60%) or because they believe they are paying too much for insurance (42%)
- One third of consumers say that people committing fraud want to make up for the deductible they would have to pay as part of a filed claim
- One out of 10 people knows someone who has inflated the value of a claim, most often for auto and property/homeowner insurance.
In a separate study, fewer people think it's unethical to lie on insurance applications, file a claim for damage before the damage actually happened, or inflate a claim to cover the deductible, says 2007 research by the Coalition Against Insurance Fraud. The study, Four Faces of Insurance Fraud, found that more than one out of five adults thinks various insurance schemes are ethical. That means about 45 million people are potential cheaters or would have few qualms when others do it. And fewer than two in five adults feel good about the insurance industry. That's also sharply down from the decade prior and means that about 90 million adults are discontented. Many could easily rationalize cheating insurers if they were to see a chance.
Most Americans believe insurance fraud is prevalent in U.S., the study also reveals. The implication here is important. People may become bolder about fleecing insurers if they believe insurance fraud is an accepted part of American life, i.e., "Everyone does it, so why not me?"
Many young people also could justify committing insurance fraud later in life, says 2009 research by the Josephson Institute of Ethics. Youths 18 years old and younger are five times more likely than adults over age 40 to hold the cynical belief that lying and cheating are necessary to succeed (51% vs. 10%). And youths who believe they must lie or cheat at least occasionally to succeed are:
- Three times more likely to have inflated an insurance claim (7% vs. 2%)
- Three times more likely to inflate an expense claim (13% vs. 4%)
- Three times more likely to lie to a customer (22% vs. 7%)
To be sure, large majorities of Americans don't tolerate fraud—that much is encouraging. But we can't assume people will stay honest, especially in a down economy. And even if fraud-prone consumers are a relatively low percentage, numerically they're still a large army—tens of millions—capable of defrauding insurers, their employers and trusting consumers.
Fraud fighters have an array of responses. Among them:
Raising premiums (passive). Simply shifting fraud losses to policyholders by raising premiums risks increasing consumer antagonism toward insurers. That only encourages more fraud and creates other problems, such as difficulty in passing anti-fraud legislation because insurers are perceived as greedy and self-interested.
Prosecuting cheaters (active). Insurance fraud can't simply be arrested out of existence. There are too many swindlers and too few fraud fighters to keep pace. We must keep up the pressure, but that alone won't solve the problem.
Changing attitudes (active). This approach has garnered the least attention and funding but has great upside potential. We must erode bad attitudes that encourage fraud and build good attitudes that can help stifle this crime.
Reach Out and Touch Someone
This is the job of public outreach—communicating with the masses and engaging consumers as partners in curbing fraud. National outreach campaigns against drunk driving, AIDS, cancer, heart disease and other problems have saved countless lives by altering people's beliefs and ultimately their behaviors. Why not brand insurance fraud as a national scourge? Over time, an aggressive campaign could be a game-changer. A key target would be moral fence sitters. Unlike hardened career fraudsters, many fence sitters are morally malleable. Given the right messages, many can be persuaded against fraud and even converted to full allies.
However, public outreach remains a second-tier priority among most insurers and fraud bureaus. There is no full-bore national campaign against insurance fraud. Most outreach now is statewide or local. Claims professionals, insurance investigators and others honorably volunteer their time for local anti-fraud programs, but most lack the funding and expertise to reach their full potential. Fraud bureaus also do some outreach, but most are too thinly funded for sustained and powerful efforts. Only a handful of state groups, such as the Pennsylvania Insurance Fraud Prevention Authority, New York Alliance Against Insurance Fraud and Virginia State Police, have sustained decently funded campaign-level outreach efforts.
We must encourage all local efforts, no matter what their quality or ambition. Every word spoken against insurance fraud is better than silence. One tool is an outreach manual from the Coalition Against Insurance Fraud, Get a Grip on Fraud. It is loaded with ideas, such as school field trips to local jails that give kids realistic "fingerprinting" and "booking."
But let's face it: We don't know if the standard anti-fraud messages even work. Most messages come in variations of two flavors: (1) Insurance fraud costs everyone money; and (2) Don't commit fraud — you'll go to jail.
The lack of a professionally run national campaign leaves a huge gap in public outreach. A national effort could fund research to show if current messages are hitting their mark or if better efforts are needed. Using sophisticated techniques, such a campaign also could forcefully discredit common rationalizations for bilking insurers.
We could also better track the most up-to-date consumer attitudes about fraud. This will give us a better feel for the pulse of public opinion and how well the campaign is succeeding.
The campaign would be focused on direct benefits to consumers—empowering them to avoid being scammed, how to report fraud, and why they shouldn't take part. Ideally, responsible consumer advocates would advise or even become part of the effort. This will ensure that the consumer voices help round out the campaign and lend it credibility that insurers alone might not be able to carry.
Insurers would be the likely funders of a national campaign. No one else has the money. Whether the effort involves TV ads, large doses of social media, or hiring the Transformers as celebrity supporters is an open question. But one issue is clear: We must get more serious about changing people's attitudes now instead of allowing fraud losses to reach a painful critical mass.
Public outreach isn't a cost center, it's an investment. Promoting the public welfare is good corporate citizenship and even better business.