What are the reasons for increases in insurance fraud?

The causes and factors behind insurance fraud are varied and oftentimes complex:

Public attitudes.

Some Americans tolerate insurance fraud, mistakenly thinking it is a victimless crime. A 1995 Roper study for the Insurance Research Council found that 24 percent of Americans feel it was acceptable to pad a claim to make up for premiums paid in previous years. Nearly 40 percent of residents in large cities found the practice acceptable, as did those in New York, New Jersey and Pennsylvania.

An earlier Roper study found that 32 percent of Americans said it was acceptable to underestimate the miles they drive when applying for insurance coverage. Another 23 percent said it was OK to lie about where they garage their cars in order to lower auto premiums. Some people justify fraud because they feel the insurance premiums they pay are unjust.

People commit insurance fraud because they can get away with it, most Americans believe. So says a new survey of more than 1,000 U.S. adults by Accenture.

Nearly six of 10 people (56 percent) agree that people believe they won’t get caught — up from 49 percent in last year’s survey.

Nearly a third believe people commit insurance fraud because people think they pay too much for insurance.

Another 24 percent say people commit fraud to make up for their deductibles.

Nearly one half (45 percent) who know someone who made an inflated claim said that a doctor, body shop, appraiser or other person also was involved.

Insurer claims practices.

Many insurance companies unwittingly promote fraud by paying suspicious claims rather than fighting them. Insurers sometimes reason that it would be less expensive to pay a suspicious claim than to pay more in legal fees to fight them. Many insurers also resist fighting suspected claims for fear of multi-million-dollar "bad faith" lawsuits.

High-risk insurance.

Mainline insurers sometimes are unwilling to provide high-risk insurance, making the marketplace susceptible to bogus insurance companies who come in to fill the void.

Medical economics.

Large numbers of uninsured and under-insured patients, combined with cost-conscious managed care programs, have reduced health care profits in some segments of the medical industry. Some treatment facilities and health providers are tempted to make up the difference by inflating or fabricating claims of insured patients.

Insufficient penalties.

Insurance fraud is perceived as a high-reward, low-risk proposition. With overburdened prisons, jail sentences usually are infrequent and light. Compared to trafficking in drugs, insurance fraud is safer and more rewarding in most instances. Additionally, doctors and lawyers are regulated by their peers through professional societies whose disciplinary systems provide little viable safeguards or remedies when members are caught or are suspected of defrauding.

Low law enforcement priority. In many cases, law enforcement and prosecutors have given top priority to reducing drugs and violence in society, shifting manpower and other resources away from insurance fraud.

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