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Reassessing Fraud Risk, Part 1

The first in a two-part series examines the fraud epidemic, from claims risks to employee crime.

By Denise Tessier | Updated on April 25, 2013

One of the most significant risks an insurer faces today is the risk of fraud. According to the December, 2012 Forrester Research report “Prevent Insurance Crime with the Four Cornerstones of Better Fraud Management” (the “Forrester Report”), the FBI estimates that non-healthcare insurance fraud costs the industry at least $40 billion annually. The resulting average higher insurance premium by household is at least $700 annually.

Insurance industry estimates generally put fraud at about 10 percent of the P&C industry’s incurred losses and loss adjustment expenses each year. With respect to healthcare fraud, the Government Accountability Office estimates that improper Medicare payments alone amount to at least $17 billion annually, and some estimates of healthcare fraud overall are cited to be in excess of $500 billion.

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