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Insurance Fraud: A Big Problem That Requires Our Attention
Jeff Ryan
May 6, 2025
Insurance fraud is a significant problem, exceeding $300 billion annually, with the Property and Casualty sector contributing nearly $50 billion to that total.
The result is that everyone pays more through higher insurance rates, which many statistics suggest could account for up to $400 to $700 per year for the average insurance customer. In an environment where inflation has already taken a significant bite out of everyone's insurance budget, it is incumbent upon all of us to address the problem.
Fraud happens in various forms, from staged auto accidents to exaggerated homeowners' claims and fraudulent workers' compensation filings.
Auto insurance bears a significant burden, with over $20 billion lost to premium leakage each year due to application misrepresentations. Underreporting mileage and omitting drivers will result in over $10 billion in costs annualy. Fraudulent bodily injury claims further inflate premiums.
Homeowners' insurance fraud often increases after natural disasters, with exaggerated losses. In some high-risk states like Florida, fraudulent contractor schemes and post-disaster claims drive up premiums. The result is a national average homeowners' insurance cost of $2,300 per year (for $300,000 in coverage). Fortunately, our area's average rates are
much lower.
Business insurance faces similar challenges. Workers' compensation results in false injuries or misclassification of workers to reduce premiums.
At the risk of sounding overly pessimistic, the trend is worsening. Sixty percent of insurers report an increase in fraud over the past three years, driven by economic pressures and increasingly sophisticated schemes (Forbes, 2025).
What Consumers Can Do to Fight Insurance Fraud
Consumers play a crucial role in combating insurance fraud, beginning with vigilance and heightened awareness. Recognizing signs of fraud is essential—be cautious of unsolicited offers, pressure to sign assignment of benefits forms, and requests for personal information.
Another critical step is to protect your data. Many fraudulent claims are committed by stealing your identity. Avoid sharing your sensitive information with illegitimate sources. Use a reputable password manager and, whenever available, multi-factor authentication on websites.
Keeping your policy information up to date and accurate, and stored in a secure place, helps protect you from fraudulent claim activities. Consumers should also report suspected fraud to the Insurance Fraud Bureau (IFB) or
NAIC's online system, as underreporting hinders enforcement. Purchasing identity theft or cyber insurance can provide additional protection against fraud-related losses.
The Role of Independent Agents
As an Independent Agency, the Ryan Agencies are on the front line of defending against insurance fraud. We work with you, our clients, to ensure we properly verify information, cross-check details and work to rectify inconsistencies.
The Role of Insurance Companies
With the increasing use of Artificial intelligence, insurance carriers are now utilizing data mining to detect fraud trends. Deloitte predicts that AI as a fraud detection tool can save P&C insurers over $100 billion by 2032 in the battle against fraud.
A Call to Action
As can be seen, fraud costs us a significant amount each year. To help mitigate the impact on premiums, it is essential that insurance consumers remain vigilant, protect their data, and report any suspected fraud. At the same time, independent agents and insurance companies can utilize education, technology, and advocacy to protect their clients. Together, we can reduce the $300 billion per year fraud burden and create a more affordable insurance landscape.
Some Sources:
- Forbes, "Insurance Fraud Statistics 2025," https://www.forbes.com/advisor/insurance/fraud-statistics/
- Deloitte, "Using AI to Fight Insurance Fraud," https://www2.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-predictions/2025/ai-to-fight-insurance-fraud.html
- Insurance Fraud Bureau: https://www.insurancefraudbureau.org/
Frequently Asked Questions About Combating Insurance Fraud Costs
What is the estimated annual cost of insurance fraud in the United States?
Insurance fraud is estimated to cost over $300 billion annually across all sectors, with the Property and Casualty (P&C) sector alone contributing nearly $50 billion to this total.
How does insurance fraud affect the average insurance customer?
Insurance fraud directly impacts consumers by leading to higher insurance rates. Statistics suggest that this could add between $400 and $700 per year to the average insurance customer's costs.
What are some common forms of insurance fraud?
There are various forms of insurance fraud, including staged auto accidents, exaggerated homeowners' claims, fraudulent workers' compensation filings, application misrepresentations in auto insurance (like underreporting mileage or omitting drivers), exaggerated losses after natural disasters, fraudulent contractor schemes, false injury claims in workers' compensation, and misclassification of workers to reduce premiums.
Why is the trend of insurance fraud considered to be worsening?
The trend is worsening due to economic pressures and increasingly sophisticated fraudulent schemes. Sixty percent of insurers have reported an increase in fraud over the past three years.
What steps can consumers take to help combat insurance fraud?
Consumers can combat insurance fraud by being vigilant and aware of potential signs of fraud, such as unsolicited offers or pressure to sign assignment of benefits forms. Protecting personal data, keeping policy information accurate and secure, and reporting suspected fraud to organizations like the Insurance Fraud Bureau (IFB) or the NAIC's online system are also crucial steps. Purchasing identity theft or cyber insurance can offer additional protection.
How are independent agents like the Ryan Agencies involved in preventing insurance fraud?
Independent agents are on the front lines of defending against insurance fraud by working with clients to verify information, cross-check details, and rectify inconsistencies, ensuring proper and accurate policy information.
How are insurance companies using technology to detect and combat fraud?
Insurance companies are increasingly utilizing Artificial Intelligence (AI) and data mining to detect fraud trends. Deloitte predicts that AI as a fraud detection tool could save P&C insurers over $100 billion by 2032 in their fight against fraud.
What is the overall call to action to address the problem of insurance fraud?
The call to action emphasizes that addressing the $300 billion annual fraud burden requires a collective effort. Insurance consumers should remain vigilant, protect their data, and report suspected fraud. Simultaneously, independent agents and insurance companies can leverage education, technology, and advocacy to protect their clients, with the goal of creating a more affordable insurance landscape.
Combating Insurance Fraud Costs? Deep Dive Podcast
The content in this article, including the podcast and FAQ, was created by the staff at The Ryan Agency, with portions generated using artificial intelligence. This information is for general informational purposes only and should not be relied upon as professional advice. For guidance specific to your situation, please consult your policy documents and an insurance professional. The Ryan Agency, Jeff Ryan, and our staff expressly disclaim any liability for actions taken or not taken based on this content without consulting your policy or an insurance professional.
About the Author: Jeff Ryan has been a licensed insurance agent since 1978, later becoming a full-time insurance professional in 1983. Since then, he has been the principal of The Ryan Agencies with offices in Hornell, Jasper, and Wellsville. The agencies serve approximately 15,000 clients in New York and Pennsylvania. Jeff holds numerous credentials including the Chartered Property & Casualty Underwriter (CPCU), Certified Insurance Counselor (CIC), Accredited Advisor in Insurance (AAI), Chartered Life Underwriter (CLU), and Chartered Financial Consultant (ChFC) designations. He holds a Master's Degree from the American College. Jeff enjoys writing about all things insurance and welcomes your questions and feedback.
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Living in New York, you might have a stack of insurance documents—auto, homeowners, health, or life insurance policies—filed away somewhere. But how long should you keep those documents, and specifically, what papers should you hold on to?
The year 1962 was marked by historic events—from the Cuban Missile Crisis to the passing of Marilyn Monroe. But while the world focused on these headlines, Lee A. Ryan was working alongside his brothers on my grandparents' farm when an unexpected opportunity arose—an invitation to join the insurance business. With no prior experience, no clients, and limited resources, my dad took a leap of faith and partnered with Nationwide Insurance to start an agency from scratch. Operating out of his home on Karr Valley Road in Almond, NY, he built his business one relationship at a time (some of whom are still clients!), laying the foundation for what would become a lasting legacy.
“Am I covered if I drive someone else’s car?” Or, “Am I covered if someone else drives mine?”
Many don’t realize that the insurance industry is one of the country's most regulated business segments, especially in New York State. The New York State Department of Financial Services (NYS DFS) wields significant control over the insurance business and has a stated goal of protecting consumers.
Most property insurance companies offer Actual Cash Value or Replacement Cost settlement options. Typically, insurance companies will require that you insure the property to the settlement value you choose. If you select Actual Cash Value, the amount you may be required to insure the property for will be less than the corresponding Replacement Value.
In that spirit, the Ryan Agency is sponsoring a Stearns BBQ Dinner pickup at our office on 57 Broadway Mall in Hornell on September 12th from 3:00 PM to 4:30 PM.
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Insurance companies offer various discounts for which their policyholders may qualify.
Great Eight number Six (6) suggests taking a look at removing Comprehensive and Collision on Older Vehicles.
By reducing the number of claims in your insurance history, you can significantly affect your rates in the future.
