fbpx
Friday, 28 August 2020 16:42

Coronavirus Raises Fears of Increase in Insurance Fraud

Written by Alicja Grzadkowska, Insurance Business Magazine
Coronavirus Raises Fears of Increase in Insurance Fraud Shutterstock

Index

As if the insurance industry didn’t have enough to worry about amid the coronavirus pandemic, from how business interruption coverage lawsuits will be decided to how longer term remote working arrangements will impact insurers’ services, they also have to keep an eye out for an uptick in insurance fraud.

After all, hard economic times often bring about an increase in fraud, including more opportunistic fraud, such as policyholders faking claims or exaggerating the nature of a loss, as well as a potential increase in liability and casualty fraud as businesses come under greater stress.

 

“The last three or four months when [the pandemic has] created economic instability in our country and around the world, it has also created, unfortunately, some desperate and opportunistic circumstances, so we see an uptick in fraud, particularly on the auto side,” said Mike Flato, chief claims officer for Liberty Mutual, during a Q&A on the future of insurance at the Connected Claims USA virtual summit.

 

Looking back at the 2008-2009 economic recession, the Florida Division of Insurance Fraud reported a 21% increase in referrals compared to 2007-2008.

 

More broadly, as incomes fell, the most common types of fraud that spiked included vehicle insurance fraud, mortgage fraud and workers’ compensation premium fraud, according to a report by BAE Systems.

 

Even in good times, insurance fraud is pervasive. Fraud accounts for 5% to 10% of claims costs for U.S. and Canadian insurers, as noted by the Coalition Against Insurance Fraud, and 32% of insurers have said that fraud was as high as 20% of claims costs.

 

“It’s really hard to get out in front of fraud. Oftentimes, the reality is we’re reactionary, not proactive, to new schemes because we don’t sit around trying to dream up how to defraud ourselves,” said Flato.

 

Despite these challenges, the Liberty Mutual executive added he does believe the insurance industry is getting better at identifying and preventing fraud. Anti-fraud efforts are a significant area where carriers look for the opportunity to establish their competitive advantage. Nonetheless, innovation in insurance and, specifically, the application of data and analytics will be needed to support these efforts.


Previous Page Continue reading »

Read 682 times