While it may seem harmless at first glance, insurance fraud leads to many serious consequences, often affecting people’s well-being, especially when it involves staged accidents.
For insurers, it has been an uphill battle, but recent advances in technology have made successfully committing insurance fraud drastically harder. Here, we’ve gathered all the most important and recent insurance fraud statistics. This is what the industry looks like in 2021.
- Insurance fraud causes $80 billion worth of damage to consumers.
- 78% of American citizens worry about insurance fraud.
- The insurance industry counts 7,000 organizations in the US alone.
- Insurance scams cause $29 billion of damage to auto insurers annually.
- Roughly 85% of insurers have dedicated investigation teams.
General Insurance Industry and Insurance Fraud Stats
1. Taiwan has the highest rate of insurance penetration - 17.4%.
In the past 10 years, Taiwan’s GDP has been steadily rising, and with it, insurance penetration rose significantly above the global rate of 7.3%. At 12%, the US also has a pretty high rate of total insurance penetration.
2. There are more than 7,000 insurance organizations across the US.
The massive insurance industry is growing by the day in the US, collectively bringing in $1 trillion in premiums. While the sheer size of it is impressive, the statistics on insurance fraud show that the overall insurance costs have grown alongside the industry.
3. In 2020, Prudential Financial was the largest life insurance company in the US, with assets under its management worth $1.72 trillion.
Founded more than 140 years ago, Prudential Financial is one of the oldest companies in America, too. It offers life insurance, pension investments, mutual funds, securities brokerage, and other services. The total value of assets under its management was valued at $1.72 trillion in 2020.
4. Insurance fraud causes $80 billion worth of damage to American consumers every year.
The cost of insurance fraud keeps growing. Once an insurance fraud happens, it doesn’t hurt just the insurance company, but it can affect ordinary consumers, too. In fact, according to the Coalition Against Insurance Fraud, Americans suffer billions of dollars of damage caused by insurance fraud.
5. In 2019, UK insurance companies registered 300 insurance frauds per day.
UK insurers had their hands full in 2019, detecting a fraud attempt every five minutes. That all adds up to 107,000 fraudulent claims, a 5% increase from the previous year, according to insurance scam statistics. The number of actual fraudulent claims was likely much higher, as these are only the ones the Association of British Insurers managed to detect.
6. An average fraudulent claim in the UK in 2019 was worth £11,500.
With such a high frequency of insurance fraud attempts in the UK, insurance companies see £3.3 million worth of fraudulent claims every single day. In total, UK insurers discovered £1.2 billion worth of insurance fraud during 2019. The average claim value, however, was lower compared to 2018, when it stood at £12,200.
7. US insurance fraud stats reveal that, in 2020, a form of fraud was present in 18% of insurance claims.
The COVID-19 pandemic was a difficult period for insurers, too. Usually, the average fraud-to-claim ratio is 10%, but during the first year of the pandemic, it nearly doubled, according to the insurance companies surveyed by Friss. Staged vehicle thefts and accidents were the most common fraud attempts, followed by phantom services and fake home accidents.
8. 30% of insurers said they increased the rate of fraud screening during the COVID-19 pandemic.
No other global event highlighted the importance of digitalization better than the novel-coronavirus pandemic, and the latest insurance fraud statistics confirm that. With millions of people in lockdown, businesses were forced to adapt if they were to overcome this new hurdle. According to Friss, 65% of 500 global insurance organizations that participated in the survey decided to focus on modernizing their businesses through digitalization, with 30% raising the number of fraud checks.
9. 78% of Americans say they’re concerned about insurance fraud.
Americans have been aware of the damage caused by insurance fraud for many years, but in recent years they’ve been showing an increased level of tolerance for it. For example, in a 1997 survey, insurance scamming statistics revealed that 93% of respondents believed it would be unethical to file a misrepresented claim, compared to 88% in the most recent survey. Likewise, the number of respondents saying inflating an insurance claim is unethical fell from 91% to 84%.
10. 85% of Americans over 55 believe it’s unethical to evade insurance premiums.
Younger US generations are less critical of insurance premium evasion. Only 68% of respondents under 35 years of a 2019 Gallup survey said they believed evading premiums was unethical. On the flip side, online insurance fraud statistics reveal that consumers in their 20s and 30s have a 25% higher rate of reporting lost money than people over 40 years of age.
11. For 70% of respondents, high premiums are enough of a reason for committing fraud.
Statistics tell us that US consumers are worried about insurance costs, and that they don’t consider the current insurance system fair. More and more people justify insurance fraud because they believe insurance premiums are unrealistically high. Another reason for committing insurance fraud perceived as valid and justifiable by 63% of respondents are high insurer profits.
Health Insurance Fraud Statistics
12. There were $3.1 billion worth of false health insurance claims in 2020.
Healthcare fraud in the US isn’t as uncommon as one may be led to believe. However, various corrective actions have been taken, and the rate of insurance fraud in the healthcare system has decreased.
13. Only 1% to 3% of life insurance claims are investigated for fraud or outright denied when first filed.
The number of fraudulent claims might initially seem low, but life insurance statistics reveal that as the contestability period (during which the insurance company can review and contest an insurance claim) draws to a close (usually after two years), the number of revoked claims drastically rises. It is during this time when roughly 20% of all life insurance claims are found to be fraudulent.
14. During the fiscal year of 2020, there were $42.94 billion worth of improper Medicare payments (FFS, Part C, and D combined).
Medicare fraud rates are steadily declining, at least according to the latest Medicare fraud statistics. In FY 2019, the total value of improper Medicare FFS payments was $28.91 billion, or 7.25%. Within a year, that number dropped to 6.27%, mostly thanks to reduced irregularities with payments for home healthcare.
15. Improper Medicaid payments totaled $86.49 billion during the fiscal year of 2020.
Unlike Medicare, Medicaid saw a considerable spike of irregularities within the same period, resulting in 21.36% of all payments being improper in one way or another. Compared to Medicaid fraud statistics for FY 2019, when improper payments accounted for 14.90% of all Medicaid payments, it’s an increase of $29.13 billion.
16. From 2016 to 2020, improper payments for home health declined by roughly $5.9 billion.
Thanks to policy clarifications and Targeted Probe and Education, home health has seen a steady decline in fraudulent and improper payments within the past five years. Likewise, skilled nursing facilities have seen a decline of improper payments by $1 billion during the same period.
Auto Insurance Fraud Statistics
17. Insurance scams cause $29 billion of damage to auto insurers annually.
Staged crashes, false or overblown reports, faking information… All these cause harm to insurers and can be extremely dangerous. The most extensive damage, $10 billion a year, is caused by unidentified drivers, people who used fake IDs or lied in other ways to get their cars insured. Underestimated mileage leads to $5.4 billion in fraud, while accident insurance fraud statistics reveal that staged accidents result in $3.4 billion in fraudulent claims.
18. There were 8,500 intentional vehicle fires during 2018.
Some people will do anything to get a hold of insurance money and won’t even shy away from setting their own car on fire to make it look like an accident. Car arson was, luckily, on a decline in 2018, as it decreased by 11% from the year before. However, intentional arson of structures increased by 13%.
19. In the UK, motor vehicle insurance scams are the most common type of insurance fraud, causing £605 million in damages.
Year after year, property insurance fraud statistics show that scams involving motor vehicles contribute the most toward total insurance fraud value in the UK. On top of that, 75% of these claims include an additional claim about personal injuries, which is why the UK government has announced reforms regarding what constitutes personal injury.
20. An average American family spends $1,548.28 annually on car insurance.
Owning a car has become even more costly for an average American household. The most significant spike in car insurance costs happened in 2019 when the average annual expenditure on vehicle insurance increased 58% from 2018.
Insurance Antifraud Statistics
21. Of all US states, only Oregon has no insurance fraud laws.
In 48 states, insurance fraud is defined as a specific crime, while 30 states have insurer fraud defined as a specific insurance crime. Currently, eight US states don’t have dedicated insurance fraud bureaus.
22. 85% of insurance companies have appointed a fraud investigation team.
These days, insurers have to appoint whole teams to combat rising health care and other fraud. According to statistics, seven employees on average are assigned the task of investigating fraudulent claims in insurance companies of today.
23. Only 10% of insurers use algorithms to flag suspicious claims.
Modernization and machine learning are still far from widespread use in the insurance industry. There are, however, promising plans for building models that’ll help with fraud detection and lower costs.
24. 21% of insurers in 2019 said they planned to implement AI fraud detection in the next 24 months.
There are methods for detecting and even preventing fraud by employing artificial intelligence. Insurance fraud statistics indicate that predictive analytics is the most sought-after technology in this field. Forty-three percent of insurance organizations now analyze social media during their fraud investigations.
25. The risk of insurance fraud limits the product offering for 87.5% of insurers.
Every single insurance organization surveyed by RGA in 2016 confirmed it was concerned about potential fraud. For most, that risk also translated into an inability to innovate, leading to reduced earnings potential for insurance companies and higher insurance premiums for their clients.
26. The insurance fraud detection industry is expected to grow by 17.4% within the next five years.
As the number of insurance fraud cases rises, so does the number of countermeasures. The industry of fraud detection and prevention is on a path of steady growth, with North America currently being the largest market for this technology. Experts believe Asia-Pacific is the region that’ll mark the most significant growth in this field in the 2021-2026 period.
The Bottom Line
It’s evident that insurance fraud hurts a lot of people, not just the “big evil corporations.” As we’ve seen from the statistics about fraud complaints and especially about car insurance fraud, the dangers of evading paying insurance premiums, or worse, staging accidents to collect insurance payouts aren’t just monetary.
The insurance industry is adapting, though, and within the next five years, we can expect to see a decline in at least some forms of fraud.