(Editor's Note: The following article was contributed by Barry Zalma, Esq., CFE, who has been practicing insurance law in California for more than 40 years.)
As claims professionals well know, insurance fraud is rampant in the United States. Experts have estimated the crime robs the industry of between $80 billion and $300 billion each year. Yet, no one knows the true amount because so many fraudulent insurance claims succeed. Those that do result in a prosecution and conviction are rare. People convicted of insurance fraud are usually amazed at the conviction and will invariably attempt to avoid the conviction by seeking reversal in the appellate courts. The fact that they have funds to pursue an appeal is evidence of how successful and profitable insurance fraud can be.
When an insurer conducts a thorough investigation of a third-party claim, if it is false and fraudulent, the fraud will be detected. In California, every insurer is required to have a special fraud investigation unit and train all claims personnel annually about recognizing potential insurance fraud. When the claims department and the SIU work together evidence will be found and presented to a prosecutor through the Fraud Division of the California Department of Insurance.
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