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Robust Rate Evasion Practices

Rate evasion costs personal lines auto carriers more than $16 billion each year. But insurers can still bolster profitability and identify risks by employing various detection tools and resources.

By Diana Small | Updated on July 26, 2009

In today’s challenging business environment, it is essential for property and casualty (P&C) insurance carriers to identify profitable risks and potentially fraudulent claims as early in the policy or claim lifecycle as possible. Rate evasion is one of these identifiable risks. Intentionally providing carriers with inaccurate personal, automobile, or property information is known as rate evasion.

Several recent studies estimate that rate evasion costs personal lines auto carriers more than $16 billion each year, which represents almost 10 percent of the net premiums written. In all its forms, fraud accounts for 10 percent of the incurred losses and loss adjustment expenses (LAE) of the P&C insurance industry, or about $30 billion annually. It adds as much as $300 per year to the premiums for the average U.S. household and accounts for as much as $0.30 of every insurance dollar paid.

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