Costs of fraud

LET’S SAY YOUR FAMILY has a windfall of nearly $4,000 this year. How would you spend it?

Covering the damage of insurance fraud surely wouldn’t be your top choice. Yet, insurance scams cost each U.S. family of four about $3,800 per year, according to an analysis by Michael Skiba, Criminal Justice program director at CSU Global. The costs come mainly in increased insurance premiums consumers must pay to offset fraud.

The total cost of insurance fraud in the United States is more than $308 billion annually, Skiba found. The estimate includes all facets of the insurance industry, including property, health care, and life and disability insurance.

Skiba – professionally known as “Dr. Fraud” – is a consultant and frequent speaker on financial crimes. He conducted research for a 2022 report titled “The Impact of Insurance Fraud on the U.S. Economy,” published by the Coalition Against Insurance Fraud, a consumer advocacy group.

Insurance fraud comes in many forms, Skiba said. Examples include misrepresenting facts to lock in lower premiums and exaggerating injuries to gain additional health benefits or, in the case of providers, to inflate billing; organized criminal groups likewise conduct targeted insurance fraud, he said.

“Insurance fraud is high reward and low risk, which makes it stand out among other types of fraud,” Skiba said. “The nature of the insurance system, with many gaps in how claims are processed, makes it a very easy target and creates additional opportunities to commit fraud. Given how easy this fraud is to commit, how acceptable it seems to many Americans, and how hard it is to detect, the level of insurance fraud in the U.S. is only expected to grow.”