Pandemic Fuels Rise in Insurance Fraud: A Closer Look at the Alarming Trend

Pandemic Sparks Increased Susceptibility to Fraudulent Claims

The COVID-19 pandemic has not only disrupted daily life but also the insurance industry, leading to a surge in fraudulent claims. According to a survey conducted by FRISS, a provider of fraud and risk detection solutions, insurance professionals suspect that 20 percent of claims filed in 2022 might contain fraud, up from 18 percent in 2020. This rise is attributed to fraudsters becoming more creative and exploiting the accelerated digital processes that have been adopted by the industry.

Top Challenges in Fraud Detection and Prevention

The survey highlights that the top challenge faced by insurance professionals in 2022 is "Keeping up with fraudsters' modus operandi," a shift from previous years where "Internal data quality" was the primary concern. This change underscores the evolving nature of insurance fraud, which requires constant adaptation and innovation in detection methods. The cost of insurance fraud to U.S. consumers is estimated to be at least $80 billion annually, according to the Coalition Against Insurance Fraud, with non-health insurance fraud costing around $40 billion a year, as reported by the FBI.

Effectiveness of Fraud Detection Software

Despite the challenges, respondents to the survey report that fraud detection software has proven to be generally effective. Improvements in loss ratio, staying ahead of developing fraud schemes, and increasing investigator efficiency are among the benefits noted. However, the dynamic nature of fraud means that continuous investment in technology and training is essential to maintain effectiveness. As the industry continues to digitize, it is crucial for insurers to stay vigilant and proactive in combating fraud to protect consumers and maintain the integrity of the insurance market.

For consumers, it is advisable to be aware of the signs of potential insurance fraud and report any suspicious activity to their insurer. Staying informed and vigilant can help mitigate the impact of fraud on insurance premiums and ensure a fair market for all.