Fraud is a costly problem. But how does the cost compare to other expenses?
Consider this: Hurricane Andrew ravaged the East Coast in 1992, causing an estimated $16 billion in damages. Hurricane Katrina, which struck the Gulf Coast in 2005, caused approximately $41 billion in losses. These storms are considered America’s worst national disasters, but its financial repercussions pale when compared to the cost of insurance fraud:
- In total, insurance fraud costs more than $96.8 billion a year.
- Conservative estimates place the cost of property/casualty insurance fraud at $20 billion a year.
- Health insurance fraud estimates top $61 billion a year.
- Life insurance fraud exceeds $11.8 billion a year.
- Auto physical damage fraud reaches about $3 billion each year.
- Disability insurance fraud is estimated to account for $1 billion each year.
- Insurance fraud is estimated to be the second largest economic crime in America, exceeded only by tax evasion.
Source: Conning & Co. 2000 report