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Insurance Fraud High In Two Virginia Cities

Overhead photo of desktop with a laptop, pen, glasses, paper with Virginia State Police stamp out fraud on paper

According to the National Insurance Crime Bureau, insurance fraud, defined as intentional deception throughout the insurance process, is on the rise in the U.S. Overall, estimated insurance fraud amounts to $308.6 billion each year and costs policyholders approximately $900 in higher premiums and other expenses.


Insurance Fraud Costs by Type


Health insurance fraud is the most frequently scammed type of insurance, followed by life insurance and property and casualty.


Here is how the fraud categories breakdown in terms of annual consumer costs:


  • Health Insurance fraud (including Medicaid and Medicare) - $105 billion

  • Life Insurance fraud - $74.7 billion

  • Property and Casualty fraud - $45 billion


Insurance Fraud Statistics


Millions of insurance claims are processed annually in the United States, with insurance fraud posing significant challenges to insurance providers and consumers. Here are some of the more compelling numbers:


  • An estimated 20% of insurance claims are fraudulent.

  • Fraud is the second-most costly white-collar crime in America, after tax evasion.

  • Insurance fraud results in higher premiums for consumers, as well as higher taxes and inflation on consumer goods.

  • The Code of Virginia states, "It is a crime to knowingly provide false, incomplete, or misleading information to an insurance company for the purpose of defrauding the company. Penalties include imprisonment, fines, and denial of insurance benefits." Only 29 other states have insurer fraud as a specific crime.

  • Forty-two states, including Virginia, have an insurance fraud bureau that requires insurers to report fraud.

  • Insurance fraud can happen during the buying, using, selling, or underwriting processes of handling insurance claims.


Two Types of Consumer Insurance Fraud


Insurance fraud can be labeled hard or soft fraud.


Hard fraud is when someone deliberately makes up a loss to get money from a claim. For example, a policyholder may intentionally destroy insured property to receive a settlement. In 2020, nearly 9,000 cars were set on fire in the U.S. for this purpose.


Soft fraud occurs more often than hard fraud. It occurs when a policyholder either overestimates the details on an otherwise legitimate claim or purposefully omits information on an application in hopes of getting a lower premium. Examples include lying about a zip code to avoid a higher premium or exaggerating the value of a stolen item to get a higher payment.


Homeowner Insurance Fraud


The most common insurance fraud scams involving homeowners insurance include the following scenarios:


  • False injuries

  • Nondisclosure of relevant information

  • Staged accidents

  • Multiple claims for the same incident

  • Roofers causing damage to support a full roof replacement

  • Theft of items that did not exist

  • Arson


This graph from the Coalition Against Insurance Fraud via Forbes Advisor shows how Property and Casualty Fraud has increased over time and how much it costs insurance companies (who pass it off to consumers):



Virginia Beach and Richmond See Most Insurance Fraud in 2023


In a recent study of the 50 most-populated cities in the U.S., Richmond and Virginia Beach were two of the top 10 with the highest risk and incidence of insurance fraud. The factors considered were the number of fraud laws enacted in each state, the number of spam calls per capita, and the number of white-collar crimes committed per 10,000 people.


Here's how the two cities ranked:


City

White-collar crimes per 10,000 people

State Fraud Laws

Scam Calls Per Capita

Ranking

Atlanta, GA

3008.09

1

1,262

1

Raleigh, NC

Unavailable

1

286

2

Richmond, VA

7,504.23

2

Unavailable

3

Charlotte, NC

2,065.53

1

203

4

Detroit, MI

855.88

1

311

5

St. Louis, MO

903.72

1

Unavailable

6

Virginia Beach, VA

Unavailable

2

246

7

Chicago, IL

Unavailable

1

182

8

Las Vegas, NV

1,056.46

1

196

9

Dallas, Texas

966.29

3

470

10

Most insurance companies are now relying on anti-fraud technology, including AI, to detect fraudulent behaviors. These include red flag detection, predictive modeling, case management, and exception reporting. A separate insurance fraud study by the Insurance Information Institute (iii.org) shows that these methods are slowing the annual increase in insurance fraud, and the U.S. will start seeing an annual decrease in within the next five years.


 

Sources: iii.org, Forbes, ALM 360 Insurance, State of Virginia Code of Law

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