What Are The Widespread Ripple Effects Of Insurance Fraud?

On Behalf of | Jul 8, 2019 | automobile accident insurance defense

It is likely that many people in Louisiana and nationally don’t get especially heated when they hear a story chronicling an egregious attempt to defraud one or more insurance companies. Indeed, the bad-faith effort of a scammer making bogus claims to garner unlawful profits is concerning, but its effects are relatively confined and do not generate broad-based public harm.


Well, actually wrong, and in a deeply emphatic way. In truth, and as noted in a recent article on the topic, insurance fraud spawns a double whammy of detriment. First, it increases insurance costs for immediately involved parties. And, second, it throws a punch at the general public as well.

Insurance “is basically pooling risk,” notes one industry principal. Claimants who receive payouts draw from the well, which must be replenished. Other policyholders refill it, typically through increased premiums. Those can be more than marginal when good-faith payers are on the hook for insurers’ payments to fraud artists.

How prevalent is insurance fraud in the United States?

Reportedly, it is uncomfortably common. Insurance regulators state that it lags only illegal drug sales as the most profitable crime in America. It is estimated that attempts to fleece insurers conceivably end up costing the public as much as $120 billion annually.

That is a notably large chunk of change, to be sure. Extrapolated, it comes out to a nearly $330 million scamming every day of the year.

Insurance fraud is not a victimless crime. Indeed, it is a widespread scourge that routinely robs the public at a stunningly high level.