CSU’s ‘Dr. Fraud’ Helps Find New Price for Insurance Fraud: $309 Billion

Insurance fraud costs the country $308.6 billion a year, well above the estimated $80 billion in 1995, according to a new report from the Coalition Against Insurance Fraud that draws heavily on CSU Global research.

The coalition, when it formed in 1993, commissioned a study to assess the cost of insurance fraud and came up with an estimate of $80 billion, a frequently cited figure. But after 27 years, it is both outdated and underrated. Adjusting for inflation, that initial figure would be $155 billion in today’s dollars.

The initial estimate did not include the additional lines of insurance now taken by the coalition, which comprises 270 member organizations including the FBI, Department of Justice, state insurance departments and all major insurance companies. insurance. The new numbers include health care, workers’ compensation, and life and disability insurance.

To calculate an updated number, the coalition turned to J. Michael Skiba, director of the criminal justice program at CSU Global in Denver, nicknamed “Dr. Fraud” in the insurance industry. Skiba argued that insurance fraud is seen as a low-risk, high-reward offense that weighs heavily on society. Insurers bear the cost upfront, but these costs are then passed on to customers in the form of higher premiums.

This estimate of fraud amounts to $932.63 per year for every person in the United States. For a person living the average number of years, those losses amount to $73,491, according to Matthew Smith, the coalition’s executive director.

Below is a breakdown of the highest number of frauds Skiba has helped calculate:

  • P&C insurance fraud — $45 billion
  • Workers’ compensation fraud – $34 billion
  • Premium avoidance fraud – $35.1 billion
  • Life insurance fraud – $74.7 billion
  • Medicare and Medicaid fraud – $68.7 billion
  • Healthcare fraud – $36.3 billion
  • Disability fraud – $7.4 billion
  • Auto theft fraud – $7.4 billion

Although car theft is not technically a direct form of insurance fraud, unless the owner is about to collect money, it is an insurance crime that costs expensive to consumers and was included in the higher estimate.

Colorado stands out in this area with the fourth highest number of car thefts in the nation with 30,452 in 2020, well above what you would expect given its 21st demographic ranking.

Richard L. Militello