Introduction:
According to figures from the US Coalition Against Insurance Fraud, the cost of claims fraud in the US alone in 1995 amounted to US$ 85.3 billion, which equates to a cost of US$ 326.47 for each American citizen. Research by the Rand Institute for Civil Justice in the US revealed that over one third of people injured in vehicle accidents exaggerated their symptoms, which adds US$ 13-16 billion to the annual US insurance bill.
Figures from the pan-European trade association, the Comité Européen des Assurances, estimate the minimum total for insurance fraud in the 25 European countries it represents of EUR 8 billion (GBP 5.6 billion), which equals two percent of annual insurance premiums. However, statistics from individual European countries suggest that this figure is very conservative. For example, according to the Association of British Insurers (ABI) insurance fraud cost the UK insurance industry GBP 650 million in 1999, 3.9 percent of claim payments, and as a result each insured pays an extra four percent in insurance premiums. In Italy, 4.58 percent of all claims and 3.25 percent of claims paid by the five major insurers were fraudulent, according to ISVAP, the insurance regulator.
In contrast, estimates of insurance fraud in Japan are low, but the problem of fraud committed by insurance company employees is serious and is growing.
The types of fraud committed vary from class of business to class of business. For example, exaggerated or totally fabricated claims are common in travel insurance, because it is often easy for the insured to commit fraud, since the alleged loss probably occurred thousands of miles away, making a detailed and thorough investigation difficult and uneconomic for the insurer. In motor claims, exaggerated symptoms and falsified injuries (such as through staged accidents) are common for third party claims, while among household claims dropping laptop computers and spilling paint on the floor “accidentally on purpose” is…