High premiums fuel fraud

Illustration: Seth

Like the proverbial chicken and egg, it's hard to know which came first — skyrocketing insurance premiums or the fraudulent claims that keep pushing them higher.

In a recent Accenture survey, nearly one-third (32%) of Americans said people who commit insurance fraud do so because they believe they pay too much for insurance, and 24% said it's to make up for high deductibles. Furthermore, nearly all the respondents (95%) said it's important for insurance companies to investigate potentially fraudulent claims, mainly to control premium expenses.

But the majority of respondents (56%) said insurance fraud occurs simply because people believe they can get away with it. The poll, based on a random sample of more than 1,000 US adults, is Accenture's second annual survey examining consumer attitudes toward insurance fraud.

"The insurance industry is still increasingly vulnerable to fraud," says Michael Lucarini, a partner in Accenture's Insurance practice, who adds there are new tools that can help prevent and combat the problem. "Leading insurers are implementing Web-based technology that can help re-evaluate claims for fraud detection throughout the claim and alert the appropriate people when thresholds are exceeded or certain parties are involved."

Insurance fraud is estimated to be the second leading source of criminal profits in North America —  following illegal drug sales — according to the Canadian Coalition Against Insurance Fraud. It reports that nearly one in four Canadians knows someone who has committed personal injury insurance fraud, and 10% to 15% of every dollar policyholders pay goes toward fraudulent insurance claims.