Most U.S. and Canadian insurers expect fraud losses for personal insurance to increase this year, according to a new survey by FICO.
In the survey, 35 percent of insurers estimated that fraud costs represent 5 to 10 percent of total claims, and 31 percent said the cost is as high as 20 percent. Meanwhile, 57 percent projected fraud losses would increase this year, while only 5 percent of insurers expect to see a decline in fraud losses on insurance for individuals and families.
Forty-two percent of U.S. insurers expect fraud to hit New York, Pennsylvania and New Jersey harder than other regions.
Respondents said they think the biggest losses will hit personal property, workers' compensation and auto insurance. Although only 11 percent of insurers blamed the expected growth in fraud on the increasing sophistication of criminal rings, 55 percent reported seeing a rise in workers' compensation fraud rings, and 61 percent reported a rise in auto insurance fraud rings. The survey also found that 63 percent of insurers believe there is increased risk of fraud in no-fault states compared to states with tort systems. No-fault insurance has come under fire in recent years due to increasing medical costs and fraud.
"Insurance claims fraud is big business -- and it's getting bigger," Russ Schreiber, FICO's vice president of the insurance and health care practice, said in a press statement. "With more people resorting to fraudulent activities, and fraud rings becoming more sophisticated, insurers must step up efforts to protect good customers, uncover organized fraud and improve the effectiveness of specialized investigative units."