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Fraud--Both Sides of the Story


[ Policyholder Awareness/Preparedness Forum ]

Posted by tonyb on February 17, 2003 at 12:34:20:

1/4 of Americans Say Its Acceptable To Defraud Insurance Cos

One-Fourth of Americans Say It's Acceptable To Defraud Insurance Companies, Accenture Survey Finds

Feb. 12, 2003--Nearly one in four U.S. adults say that overstating the value of claims to insurance companies is acceptable, and more than one in 10 say they approve of submitting insurance claims for items that were not lost or damaged or for treatments that were not provided, according to a survey released today by Accenture (NYSE:ACN).

The survey, based on a random sample of more than 1,000 U.S. adults, examined consumer attitudes toward insurance fraud. Two-thirds of respondents (66 percent) said that people are more likely to commit insurance fraud during an economic downturn than when the economy is strong. About half the respondents (49 percent) said that people commit insurance fraud because they can get away with it.

Thirty percent of respondents linked insurance fraud to the offenders' needs for money, while nearly one-fourth (24 percent) said they believe that the people who commit insurance fraud do so because they believe they pay too much for insurance. Twenty percent said they believe that the offenders commit fraud to compensate for the claims deductibles they have to pay.

"The Insurance Services Office, Inc. estimates that the cost of fraud in the U.S. property and casualty industry is approximately $24 billion, which represents 10 percent of total claims payments," said Michael A. Lucarini, a partner in Accenture's Insurance practice. "Fraud is a growing concern for insurers, whose aging technology and inefficient processes often prevent them from detecting fraudulent claims, which in turn hurts their long-term profitability. In addition, increased consumer exaggeration to improve the claims payout is becoming more prevalent in the current weakened economy."

Slightly more than one in 10 of survey respondents (11 percent) said they knew of someone who inflated the value of their insurance claim. These respondents said they believed that these claims were mainly for auto and property/homeowners insurance (47 percent and 39 percent, respectively, of respondents who knew of inflated insurance claims).

Forty percent of respondents said they were unlikely to report someone who has committed fraud. However, 83 percent of respondents said they believe that insurance companies are capable of identifying or preventing fraud-related property and casualty insurance claims.

"The burden is clearly on insurance companies to ensure they have the proper tools, technologies and skills to combat fraud," Lucarini said. "Those committing fraud are becoming more sophisticated and advanced in their methods, while many insurance companies still lack the necessary processes and systems to detect and stop fraud. However, leading insurers are implementing Web-based technology that can help re-evaluate claims for fraud during the claims lifecycle and alert the appropriate people when thresholds are exceeded."

Survey Methodology

Accenture commissioned Taylor Nelson Sofres (TNS) Intersearch to conduct a national survey about insurance fraud. The study comprised telephone interviews with 1,030 U.S. adults (at least 18 years of age) in November 2002. Of these respondents, 298 said they had filed a property/casualty insurance claim for personal, property, auto or homeowners' insurance or for worker's compensation.

TNS Intersearch is a U.S. member of Taylor Nelson Sofres, the fourth-largest marketing information company in the world, with offices in more than 50 countries.

About Accenture

Accenture is the world's leading management consulting and technology services company. Committed to delivering innovation, Accenture collaborates with its clients to help them realize their visions and create tangible value. With deep industry expertise, broad global resources and proven experience in consulting and outsourcing, Accenture can mobilize the right people, skills, alliances and technologies. With more than 75,000 people in 47 countries, the company generated net revenues of $11.6 billion for the fiscal year ended August 31, 2002. Its home page is www.accenture.com.
CONTACT: Accenture Marykate Dolan Reese, 917/452-8738 Marykate.reese@accenture.com

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In answer to Accenture's story:

The Spiral of Fraud
by Tony Braga

As insurance policies became higher priced, more company controlled and dictatorial, policyholders increasingly turned to padded and invented claims. Or was it the other way around? No one really knows for sure, but they do feed on each other and it does not matter which came first.

Fraud comes dressed in different clothes. It can be a padded claim, arson for profit, or insurance fraud ring. It can also be misleading advertising, or denying information to both sides, which is also a form of deceit. If an adjuster is trained to act according to misinformation and nonexistent authority, that adjuster can come to feel righteous in that misinformation and entitled to that authority. The same is true for policyholders who have given up their responsibility and authority, and have come to feel entitled to lay their problems at the feet of insurance.

We hear mostly about misrepresentation and fraud concerning policyholders, and undoubtedly it takes place. Conspicuously missing from the entire insurance transaction is any mention of possible criminality of the insurance company or its agents, adjusters, investigators and experts who might participate in collusion, provide misinformation, conceal policyholder rights, conceal facts, understate policyholders' losses, and negotiate claims in bad faith. They are after all, people--not saints.

If the system expects a person to act according to principle it must take into account the self-interest factor and temper it with responsibility. Otherwise the principle is diminished to the extent of self-interest predominance. This inescapable equation applies to the policyholder and the company alike.

Any system must have practical checks and balances or descend to self-destructive lower levels. Because of expediency on a grand scale by both sides, a very strange degenerative relationship has emerged. Equalization is sought by escalation, all the while lowering individual standards. The so called balance see-saws back and forth as it balloons and escalates...every action compelling a counter action. In a sense we have created our own sacred cow, beyond reason, and now the cow is demanding more and more food and needs to be looked after.

Insurance reform is a catch-all phrase conjuring up images of massive bureaucratic change, but it can also mean looking at what is in front of our collective nose. Fundamental rights and responsibilities must be provided to both sides as a matter of course. We need this puzzle piece, which is in itself reform, before we can contemplate or analyze change. More than a nicety, it is an absolute necessity. We may find because of it that only additional minor reform is needed. Lack of information and misinformation are not a reasonable guide for either side, and can eventually bring any system to its knees. The new face of insurance must decree both sides be genuinely informed and responsible if only for its own sake.

Raised standards of expectation inevitably raise standards of fulfillment, perpetuating a transformed spiral.

"Never doubt that a group of people can change the world. Indeed that is all that ever has." --Margaret Mead



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