Study Finds U.S. Annual Insurance Fraud at Record $308.6 Billion

Washington,DC (WorkCompAcademy) - The Coalition Against Insurance Fraud was created in 1993 and remains the nation’s only consumer advocacy organization devoted to educating and protecting American citizens from the cost and damage of insurance fraud.

The Coalition consists of more than 260 organizations committed to the fight against insurance fraud. These organizations include federal and state agencies, insurance regulators, legislative and insurance trade associations, state attorneys general, prosecutors, law enforcement agencies, the majority of America’s leading insurance carriers across all lines of insurance, and select companies and law firms assisting in fighting insurance fraud.

In 1995, the Coalition released an estimate of the cost of insurance fraud in the United States as being $80 billion every year. The $80 billion impact has remained the most often cited insurance fraud statistic across the nation. An 81.5% inflation rate, would convert the 1995 estimate into a 2022 cost of fraud in the United States at $145 billion!

Thus the Coalition just published an updated study this month. Colorado State University Global’s White Collar Crime Task Force (WCCTF) was the research arm spearheading this new study.

The 2022 Coalition research project focused on two areas of workers’ compensation fraud to determine their final figure, premium fraud and claim fraud.

Workers’ compensation claim fraud was determined by first developing a cost of fraud in the state of California and then using census data to predict the cost of fraud countrywide.

The baseline used was a $3 billion estimate that was derived by Frank Neuhauser of the University of California Berkeley who performed a study on the Underground Economy and Payroll Fraud. The Coalition’s Workers’ Compensation Task Force used the $3 billion figure and then assumed California's population is 12% of the total United States population (based on 2019 Census Data), the formula was developed to determine the final cost. According to the United States Census data, in 2019, the U.S. population was 328 million and California was 39.5 million; thus, California occupies 12% of the total U.S. population.

$3 billion (fraud in California) x 8.3 (California is 12% of the USA population), translates into a metric of 100 divided by 12 = 8.3. Thus $3,000,000,000 x 8.3 = $24.9 billion claim fraud in the United States.

The WCCTF concluded that workers’ compensation fraud totaled $9 billion in premium fraud plus $25 billion in claim fraud, for a grand total of $34 billion in workers’ compensation fraud in the United States.

The report continued to analyze the costs of fraud in other lines of insurance in the 46 page report and arrived at the following estimates:

- - Property and Casualty Fraud. The WCCTF estimates that the current cost of Property and Casualty fraud in the United States is $45 Billion.
- - Workers’ Compensation Fraud. The WCCTF estimates that workers’ compensation fraud totals $34 billion in the United States.
- - Premium Avoidance or Misclassification. The WCCTF estimates premium fraud in the United States is $35.1 billion.
- - Healthcare Fraud. The WCCTF estimates healthcare fraud in the United States is $36.3 billion.
- - Medicaid and Medicare Fraud. The WCCTF estimates Medicaid and Medicare fraud in the United States is $68.7 billion.
- - Life Insurance Fraud. The WCCTF estimates that life insurance fraud in the United States is currently $74.7 billion.
- - Disability Fraud. The WCCTF estimates that the current cost of disability fraud in the United States is $7.4 billion.
- - Auto Theft. The WCCTF estimates auto theft in the United States is $7.4 billion.

Using these estimates, the WCCTF estimated the total annual cost of insurance fraud in the United States to be $308.6 billion annually. Comparing that to the 1995 inflated adjusted estimate of $145 billion, the new estimate is more than a 100% increase in the costs of insurance fraud in the United States.

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