Burning Down the House: States Struggle to Turn up the Heat on Insurance Fraud
Posted: Tuesday, January 12, 2010
by Michael Brewer
Communicatia, Inc.
Drastic times call for drastic measures. Among those bashed by the lingering U.S. economic downturn, homeowners, insurance brokers and motorists alike are turning more and to insurance crimes for a personal bail-out. But state fraud investigators, suffering stiffer budgets are facing equally drastic cuts in resources to fight the fraud.
"The troubled economic climate confronts many fraud bureaus with the severest challenge they've faced in years. But a positive outcome could be greater efficiency in combating schemes as fraud bureaus find better ways to fight crime with the resources they do have," says Dennis Jay, the coalition's executive director.
Surprisingly, agents and brokerages are considered the biggest offenders, accounting for the most instances of insurance fraud in the past year. Seven of 10 fraud bureaus report a spike in agent cases, according to the coalition. Nearly 40 percent of fraud bureaus say their producer caseload was much higher. The survey of 37 state fraud bureau directors was conducted last October.
After insurance agents, anxious drivers continued ditching unwanted vehicles for insurance payouts in one of the defining fraud trends of the troubled economy. Seven of 10 fraud bureaus report more vehicle abandonment and vandalism cases, the coalition's survey shows.
More homeowners literally are burning up for insurance payouts as well. Nearly two thirds of fraud bureaus report increased home arson cases. This uptick is generally isolated to regional or local hotspots, the coalition's survey notes.
Business owners struggling to stay afloat are resorting to insurance-related crimes with 60 percent of state fraud bureaus reporting bogus liability claims. "Reports of increases in slip-and-fall claims from insurers and self-insurers-especially grocers,department stores and restaurants-began surfacing in early 2009 and seem to have continued," the coalition's survey says.
Bogus health plans are spreading rapidly around the U.S. as well, taking advantage of the large market of uninsured Americans. Most fraud bureaus report a spike in fake health plans, with nearly 40 percent saying their caseload was much higher due to health insurance misrepresentation.
Prescription drug abusers also are on the loose. More than 60 percent of fraud bureaus report more cases involving diversion of painkillers and other addictive prescription drugs such as painkillers. Drug diversion has spread with alarming speed around the U.S. in recent years, with insurers paying billions of dollars for illicit prescriptions.
Many fraud bureaus are being forced to manage this spreading crime trend with smaller budgets and staff, the coalition's survey reveals.
Some 63 percent of fraud bureaus report lower budgets for 2009. "This is somewhat surprising, given that a majority of the fraud bureaus were created with dedicated funding, specifically assessments on insurers ," the survey notes.
Nearly a quarter of state fraud bureaus also lost staff positions this year, and a third of these agencies were forced to leave vacant positions unfilled.
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