What You Should Know About Insurance Fraud
By Steve Holley

     Did you know that you are paying $200 to $300 too much for insurance every year?  No, it’s not your insurance company ripping you off.  The reason is insurance fraud.  While most insurance claims are legitimate, many are not.  These fraudulent claims cost all of us in the form of increased premiums.
     In 1992, Hurricane Andrew ravaged the East Coast causing $16 billion in damages.  This storm is considered one of the worst natural disasters in America’s history.  However, the financial repercussions of that storm pale when you consider that insurance fraud cost more than $98.6 billion each year.  Health insurance fraud estimates top $61 billion alone.  Auto physical damage and property / casualty fraud are estimated around $23 billion each year.  It is believed that insurance fraud is the second largest economic crime in America, exceeded only by tax evasion.
     If you are basically an honest person, you may be wondering exactly what insurance fraud is.  Fraud takes many forms.  Auto insurance fraud includes staging accidents, falsely reporting a vehicle stolen, and padding claims by adding items that were already damaged.  Misrepresentation on an application, such as using a friend’s address or misstating average mileage driven to obtain lower rates, is also considered fraud.
     Common property insurance frauds include arson and false claims of stolen property.  Overstating the value of stolen property is also considered fraud.  There are many examples of medical fraud.  Some examples are faking injuries and treating them longer than necessary to qualify for extra worker’s compensation benefits.  In some cases, unscrupulous medical providers bill for more costly services than performed or pad their bills with services that they never provided.
     Fraud is more than just the big scandals.  Nickel and dime scams add up, too.  It is estimated that 20 to 30 percent of all insurance claims are overstated or outright fraudulent.  For instance, let’s say your vehicle is stolen.  But, when you talk to the insurance company you “add on” missing items that never existed such as new golf clubs, an expensive camera, or fine jewelry.  That’s fraud – and it’s a crime.  Some say that 10 percent of your auto insurance premium pays for the cost of fraud.
     Insurers and law enforcement are fighting back with everything from databases to track past claims and individuals with a history of fraud, special investigative units to track down crooks, to dogs trained to sniff out fire causing products often used in arson.  But, you may be asking what you can do about it.  You can do a lot.
     Drive defensively.  Stay safe distances from other vehicles on the road to avoid a forced collision.  Lock your car doors, roll up your windows, park in well-lit areas, and consider installing a car alarm.  At home, lock your doors and don’t hide keys outside.  Also secure garages, outbuildings, and docks.  You may want to consider purchasing a home security system.  Finally, be on the lookout for fraud.  If you suspect fraud, contact the police or your insurance company or agent.  Remember that through your efforts as a Policyholder as well as the efforts of the police and insurers, we can effectively reduce insurance fraud as well as insurance rates.
     Steve Holley is President/Agency Principal of Holley Insurance Agency, an independent agency representing the Erie Insurance Group.