The latest insurance industry statistics show that from 2015 to 2018, first-party online insurance fraud skyrocketed more than 500 percent. This type of fraud is occurring due to cyber-fraud in which personal information has been stolen to either create a totally fictitious identity, or it is used in conjunction with known information to alter the identity, show a reduction in the mileage driven or driving records or even to reduce accident reports. The fake identities may even alter the location of where the vehicle is garaged to obtain lower rates.
The situation has gotten so troublesome that agencies have been created to “test” the applications against databases.
According to the National Insurance Crime Bureau, insurance fraud is costing the industry about 29 billion a year. The insurance industry doesn’t “eat this,” consumers do. It is estimated that this fraud may add up to $300 per policy.
Fraudsters Everywhere
A 2017 Nerdwallet.com confidential survey revealed that many consumers are all too willing to join in the deception. In fact, the survey found that at least 10 percent intentionally gave false information when purchasing a new policy. People admitted they low-balled mileage (about 43 percent of them), left certain family members off the policies, misstated car usage, lied about where the car would be garaged or even the zip code where they lived.
There are age and gender differences to be sure, which again raises the online fraud flag. The group 18 to 35 is more likely to deceive than older groups; men have been shown to lie about 12 percent of the time as opposed to women, who deceive about 7 percent of the time.
The patterns of online insurance fraud follow the patterns of any classic fraud behavior. It is somewhat disconcerting that the insurance industry itself doesn’t seem to have anticipated the online fraud in terms of rampant cybercrimes.
In terms of a lack of oversite and the rise of the online insurance industry, why wouldn’t the unethical, especially those operating with stolen information, attempt to commit fraud? If there is an opportunity to commit fraud through an open window allowing that opportunity, it is not surprising they would attempt to take advantage.
There is a pattern of need that has emerged. Certainly, fraud would contribute to savings. Obviously, the savings is circular. The more fraud, the more the rates go up and the more the ethical are charged. It would be naïve of me to not note that many people are angry at the high rates and take out their anger on the companies. Another category are plainly bad drivers who might have had suspensions who must rely on transportation. However, they make it more difficult for the better drivers.
The rationalization of online fraud may be a feeling, however misguided, that they can – and sometimes do – outsmart the insurance system. The rationalization they may apply is that the insurance industry is greedy and prone to price gouging may be “somewhat true” in their minds, but far more, it is a deeper rationale of being brighter than the clerks in the office.
The key to all of this is much higher ethical vigilance. The industry must close the windows of opportunity, increase the consequences for unethical choices and to better publicize that the victims of insurance fraud are the insured themselves.
LEAVE YOUR COMMENTS!
