Automobile Insurance Fraud Challenges and solutions……

The fraud challenge - $$$$$ Conning & Company Study $ 96.2 Billion – All lines Coalition Against Insurance Fraud $ 79 Billion – All lines National Insurance Crime Bureau $ 20 Billion – P&C

The fraud challenge - % of claims Rand Corporation study: 28% of all auto claims 10% of all health care $$ expended in the U.S.

The fraud challenge – Types of Scams  Staged Auto Accidents  Paper Accident Schemes  Health Insurance Fraud  Staged Vehicle Theft (owner “give-up”)  Auto Repair Fraud  Complex/Organized Crime

Why is fraud so big?  Systems are easy targets  Low risk crime  Low legal priority (prosecutors)  People tolerate fraud  Some insurers are apathetic

How do WE pay for fraud?  People lose their savings.  Premiums stay higher  Consumer goods cost more  Innocent people injured/killed

Fighting Back – Solutions!  Industry Solutions –Special Investigations Units (SIU) –Consumer Education –Employee Training –Technology Database Organizations (ISO, NICB) Link Analysis Technology Predictive modeling

Fighting Back – Solutions!  Governmental Solutions –37 State Fraud Bureaus –Closer scrutiny of phony insurers –Tougher fraud laws –Stiffer Federal penalties –Fraud plan / SIU requirements

Progress to date??  State fraud prosecutions tripled over past 10 years  Fewer people believe it’s OK to pad claims (IRC study)  Typically a 4-11:1 return on investigative investment (premium control)

The Future??  Still dangerous…. –Internet will hatch new schemes as consumers buy on-line coverage. –Global economy is igniting huge insurance $$ laundering schemes. –Corrupt organized groups continue to thrive.

Partners in the fight…..  National Insurance Crime Bureau (  Coalition Against Insurance Fraud (  State Fraud Bureaus

Everyone’s solution Insurance fraud will disappear only when criminals realize fraud is a fast highway to jail, not an easy road to riches. (Coalition)

Thank – you!! Douglas L. Ashbridge, CPCU Farmers Insurance Group (818)