Report Proposes ‘Four-Pillar Approach’ to Fight Coverage Crimes

It’s called a “war,” it’s called a “battle”—but whatever it’s called, it’s definitely expensive.

Consulting firm Deloitte released a report Monday estimating that the property/casualty insurance industry loses $30 billion a year to claims-related crimes and analyzing the pitfalls of what it said was a “piecemeal” approach in identifying and combating those insurance claims.

In its report, the New York-based firm said such cases push premiums up 30 percent, inflating costs for every policyholder and making it harder to purchase affordable auto insurance.

In fact, the economic impact of those claims hits even closer to home, as every family in the U.S. loses $950 a year, according to figures cited in the report.

The firm cited a number of alarming figures it said pointed to an “explosion” of phony claims, staged accidents and more complex plots to cheat the industry—and their customers—out of money, including the fact that nearly half of all P/C insurers reported that exaggeration of claims and distortion of claim information costs them between 11 and 30 cents of each premium dollar.

Barriers to Combating the Problem

In its report, Deloitte outlined a handful of roadblocks to pushing back on fraud.

The research firm cited a disjointed approach to combating fraud across the country, with the insurer-funded National Insurance Crime Bureau (NICB) and separate fraud bureaus in 42 states and Washington, D.C., all working to solve the problem but with “a lack of consistency in organization, approach and oversight.”

Evolution of the tools used to fight insurance crimes have unfortunately also hurt progress. While new methods of data management and analysis have surfaced, this has also led to inconsistent data formats that are difficult to streamline. And as the most-experienced claims adjusters retire, what’s left in their wake is an vacuum of experience.

Report Constructs ‘Four-Pillar’ Approach

In its report, Deloitte said the “battle” against illegitimate claims is “ongoing,” but offered a multi-pronged approach in combating those claims, beginning with establishing a strategy to identify, manage and prevent those cases.

Creating a structural model to combat those cases, instituting standards for information quality and implementing tools and analytics are the other “pillars” in the firm’s advised approach to curbing the rise in such claims.

However, no approach will be as effective without an “integrated” effort between insurance carriers throughout the industry, law enforcement agencies and the public, according to the report, which added that the facts that separate regulators exist in each state and insurers’ investigators rarely share information fracture enforcement efforts against the rising crime trend.

Bureau Finds Rise in Questionable Claims

The Deloitte report’s publication follows the release of findings from the NICB last week that show the questionable claim (QC) referrals relating to vehicles that the bureau received in the first half of 2012 was 20 percent more than the same period in 2011 and 18 percent more than the same period in 2010.

Several vehicle-related QC categories so far in 2012 showed increases compared with the first half of 2011, including a 64 percent jump in hail-related QCs, 18 percent increase in faked damage and 9 percent rise in jump-ins.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

No comments yet.

Comment on this article