The Cost of Insurance Fraud

Fraud is a costly problem. But how does the cost compare to other expenses?

Consider this: Hurricane Andrew ravaged the East Coast in 1992, causing an estimated $16 billion in damages. Hurricane Katrina, which struck the Gulf Coast in 2005, caused approximately $41 billion in losses. These storms are considered America’s worst national disasters, but its financial repercussions pale when compared to the cost of insurance fraud:

  • In total, insurance fraud costs more than $96.8 billion a year.
  • Conservative estimates place the cost of property/casualty insurance fraud at $20 billion a year.
  • Health insurance fraud estimates top $61 billion a year.
  • Life insurance fraud exceeds $11.8 billion a year.
  • Auto physical damage fraud reaches about $3 billion each year.
  • Disability insurance fraud is estimated to account for $1 billion each year.
  • Insurance fraud is estimated to be the second largest economic crime in America, exceeded only by tax evasion.

Source: Conning & Co. 2000 report

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