Now the printing plant is gone, as are the evening passenger trains, and so is Phil. It's a new journalistic world, with blogs and tweets and battling 24-hour cable news TV. Back then, TV “evening news” consisted of 15 minutes at 11 p.m., and “news” meant Lowell Thomas on the radio.

Fraud and the Cost of Insurance

This column began as a complaint, and that is what it remains. As I pointed out in an article last fall when talking about the health insurance debate, if Congress would allocate enough money for the contractors that handle Medicare and Medicaid claims to fully investigate those claims before they start issuing checks, then they would prevent the fraud that costs you and me between $70 and $100 billion each year. Now that would more than pay for the alleged trillion-dollar government health-care program Congress may or may not pass, depending on whether they can merge the House and Senate versions or someone crosses party lines.

Fraud occurs because nobody cares. Does the insurance industry really care about fraud? Why should it? The cost of fraud simply raises premiums, and profit is calculated as a percentage of premiums. In preparing one of those computer courses about California insurance fraud law, I learned that the state requires every new employee of an insurance company to take fraud awareness training within 60 to 90 days of being hired. (Cal. Ins. Code ?1874.01-81 and 2698.30(k)). Insurers are not only required to have a Special Investigation Unit (SIU) — or at least use a contracted SIU to investigate fraud — but also to report suspected fraud on special forms.

So how successful are these efforts? Well, according to the California Insurance Commissioner's 2008 report, 1,063 fraud cases were prosecuted, 89 of which were complex. Only 193 were convicted. The cases involved 1,196 defendants who had allegedly stolen some $270,465,234, of which $23,611,264 was ordered to be returned, but only $10,348,834 of it was. (The stats come courtesy of Barry Zalma and his California Fraud Letter.) To be frank, that's a pretty grim success rate for a state that is supposed to be the insurance fraud capital of America, contributing a good portion of the alleged $100 billion lost annually to fraud, of which the Coalition Against Insurance Fraud and the Insurance Information Institute (I.I.I.) allege includes $30 billion in property and casualty fraud.

Crime Rate Dropping

A 2009 year-end surprise from the FBI was a report that the number of serious crimes had dropped in 2009 by almost five percent, despite the harsh economy. Robberies and murders were down. I've not seen the full report (it's not on the website yet), but I doubt that the figures take into account insurance fraud. Unfortunately, the FBI does not break down some of its classifications. For instance, “arson” is seldom divided between “arson for profit” (usually insurance fraud) and other types of arson such as to cover a crime, juvenile arson, or vengeance, vandalism or terrorist arson, such as church, mosque or synagogue fires. The regular annual arson report has been missing for several years from Firehouse Magazine, which I faithfully review monthly, so I can only anticipate that arson for profit may also be down a bit this year.

This does not mean that we can all let down our guard. The downturn of the economy starting in 2007 has reduced a number of areas of loss. Fewer people are driving great distances, so there are fewer auto accidents. There have been fewer hurricanes; the number of workers is down, meaning workers' compensation claims are down. This is a golden opportunity for insurance companies to allow their claim staff time to “bone up” on education — why not order a set of Casualty Insurance Claims? — and spend more time investigating the claims they do have. Wouldn't that be of more benefit to the bottom line than laying off the best of the claim department? Better investigation alone will put to flight a goodly portion of property and casualty fraud.

As to medical insurance fraud, well, that may well become worse in the next decade unless Congress gets off its butt and does something to try to curtail it. If California can mandate fraud training and SIUs, then so can Congress and the other states. I know that Nebraska has a very active fraud bureau within its insurance department. As a guest speaker in 2007, I met many of those people and was very impressed with what they knew and were doing. Other states can do likewise. (Visit Nebraska's website; it has an excellent list of fraud investigation “hints.”)

Anti-fraud activities should be both efficient and effective. Currently they are not. Annual convictions of less than 5,000 tell us that most states are doing nothing to fight fraud. Several states don't even list insurance fraud as a crime, and some lack a state fraud bureau. It's an open invitation to fraudulent claims. Insurance fraud is far more costly — if the Coalition and the I.I.I. are to be believed — than all the pot smoking in the country. Yet, how many are in jail because they got caught smoking pot compared to those ripping off insurers? The Coalition suggests that 20 percent of Americans believe it is okay to defraud an insurance company “under certain [unidentified] circumstances.”

Well, it's not the 1950s any more, and the makeup of our nation has changed in the last 60 years. Loyalty to anything — a spouse, a family, an employer, a church, or an insurer — is a thing of the past. But 80 percent of us think otherwise, and believe that ripping off our insurer is not good. About 20 years ago, Dr. Menninger, the famous Kansas psychiatrist, wrote a book titled What Ever Happened to Sin? Perhaps it got lost in the “me first” generational gaps.

So I'll go on paying taxes without cheating. I'll pay the insurance premiums on time, grumble about the rip-offs, and hope nobody steals my identity. Maybe we'll have a health insurance bill this year.