For years, property and casualty carriers throughout the country have been honing their skills in the fight against fraud. From the gumshoe to the data analyst, carriers have evolved their special investigation units to maximize the tools available while, at the same time, controlling costs and, more importantly, bad faith claims.

Although this is to be applauded, it is necessary to understand that the industry is fighting a battle in which the enemy is well equipped and every weapon available must be engaged. The battle is not for coveted real estate or tactical position, but rather the billions of dollars that are being paid to misguided, dare we say, fraudulent individuals who have learned that insurance fraud is, for the most part, an easy-to-commit and often-unpunished crime.

In reality, as costly as insurance fraud has become, five states have yet to pass insurance fraud statutes and many others find it too costly to pursue. The Coalition Against Insurance Fraud has estimated that spending on fraud prevention in 2003 was nearly $1 billion. According to a McKinsey & Co. survey, the losses due to fraud likely cost property and casualty insurers $40 billion, rather than the $30 billion previously cited. Also noted by McKinsey was the fact that soft fraud seems to have stabilized, while hard fraud continues to increase. Anti-fraud efforts have not kept up with the level of sophistication and frequency of this hard fraud.