What types of insurance claims get the must scrutiny?
Every year, U.S. policyholders file millions of insurance claims. The vast majority of them are legitimate.
But every so often, a claim appears a little fishy. Perhaps that hail damage looks a little too severe. Or maybe the details of a car accident don't quite add up.
Recently, the National Insurance Crime Bureau released its annual analysis of questionable insurance claims. The study looks at claims that insurance companies refer to the nonprofit bureau for closer review and investigation because they contain one or more indicators of possible fraud.
Questionable claims in six categories - property, casualty, vehicle, commercial, workers' compensation and miscellaneous - hit an all-time high of 116,268 in 2012. That's a nearly 16 percent jump from 2011 and a nearly 27 percent hike since 2010.
For 2012, the top five questionable property and auto insurance claims with the biggest percentage increases were:
1. Suspicious disappearance/loss of jewelry (property insurance) - up 86 percent
Expensive items such as jewelry always are a prime target for fraud, says Frank Scafidi, a spokesman for the bureau. Today's soft economy may be contributing to the rising number of jewelry-related claims that insurers are classifying as questionable.
"People might be financially strapped and choose to ‘lose' a ring or necklace in the hopes of getting paid for their loss by their insurance," Scafidi says. "It works at times, but most times it doesn't."
2. Suspicious theft/loss - not vehicle (property insurance) - up 49 percent
Some people will fake the theft of an item in their home and make a claim, hoping to collect the item's cash value.
"The items in this category would be anything not involving a vehicle - laptops, cellphones, iPods, you name it," Scafidi says.
The items themselves often are sold. "There is always a market for items that people can acquire at black-market prices rather than paying retail," he says.
3. Hail damage (car insurance) - up 35 percent
It might seem difficult to fake hail damage to a car - those stones either fall from the sky and onto your car or they don't, right?
Well, not exactly. Fraudsters become inventive when making claims for hail damage, Scafidi says.
"One way is to simply take a small hammer and smack dents in a random manner over your car," he says.
Incidentally, questionable hail damage claims related to homeowner's insurance also were up in 2012, by 19 percent. A homeowner can use a small tool to create holes and divots in a roof.
In other cases, a homeowner simply looks for loose change in his pockets so he can use a technique known as "dime spinning."
"This comes from the act of taking a dime and depressing the edge of it into an asphalt composition shingle while turning the dime multiple times," Scafidi says. "It creates a neat little depression."
4. Suspicious hit while parked (auto insurance) - up 30 percent
Scafidi says claims in this category typically involve a parked vehicle that's been "hit" by something. An insurer may refer the claim as questionable because of murky information surrounding the incident.
"There might be incomplete or inaccurate information on the claim," Scafidi says.
In other cases, information on the claim may conflict with statements made by the policyholder, he says.
5. Underperformed repairs (car insurance) - up 28 percent
These claims typically involve an insured repair that was not completed as billed by a repair shop.
"For example, insurance pays for a new door on a car, but instead, the damaged door was repaired," Scafidi says. "The repair shop pockets the difference."
Fraud? Or just skepticism?
Scafidi emphasizes that while questionable claims have been deemed by insurers to be suspicious, they have not been identified definitively as acts of fraud.
"The reasons for increases could be because there are, in fact, more attempts to commit fraud," he says. "Or it could also be that there is closer scrutiny of claims as they go through processing by insurance companies."
Each year, more than 56 million insurance claims are processed, according to the bureau. That means the number of questionable claims in 2012 was just 0.2 percent of all claims filed.
Still, insurance fraud is real. From 2007 to 2011, property and casualty insurance fraud amounted to about $32 billion in annual losses, according to the Insurance Information Institute.
"It's a significant problem," Scafidi says. "And, unfortunately, a lot of those losses are passed along to consumers through higher insurance premiums."
Experts disagree about the nature of the bureau's findings.
Significant or insignificant?
Pete Moraga, a spokesman for the nonprofit Insurance Information Network of California, says the bureau's report does not surprise him.
"Something that we hear often is that fraud and questionable claims numbers tend to rise during hard economic times," he says. "With the past recession and the tough economy, these numbers may continue for a while yet."
However, Robert Hunter, director of insurance at the nonprofit Consumer Federation of America, thinks the increases cited by the bureau are so small that they're insignificant.
"Only 0.2 percent of claims are questionable, even if you accept their data," Hunter says. "That means there is one questionable claim out of every 500 claims filed, even in this tough economy."
State Farm spokesman Michal Brower says the insurer does not talk about specific claims data. Trends regarding questionable claims vary from year to year, he says.
State Farm has special units throughout the country that investigate suspicious claims and collaborate with organizations such as the National Insurance Crime Bureau, state anti-fraud bureaus and law enforcement agencies to root out fraud.
"One thing never changes: Insurance fraud is bad for consumers because fraud drives up the cost of insurance," Brower says.