Unresolved Insurance Tensions and The Future of The Problem (8)

This review has demonstrated the failure of society to effectively address the reasons for conflicted exchanges between the parties – consumer-policyholders, and the insurance industry.

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The lack of agreement on what constitutes a fraud, or what claimant behavior is deemed excessive, is a continuing and well-documented occurrence. Industry personnel and consumers agree at least upon that.


Industry behaviors contributing to the dilemma certainly include the lack of agreement on what constitutes a fraud or abuse when engaged in the practice of claims adjustment. Experts themselves do not agree, and the variations likely to exist in the practice of adjusting no doubt exacerbate the problem. Similarly, the industry has admittedly not succeeded in adequately educating its customers about the differences between claimant behavior acceptable to the terms of the policy, and that which is not.



The very nature of regulation of insurance in this country – “the system” of private insurance and its oversight – contributes substantially to the problem. Each state has evolved its own treatment of insurers, and each has, as a result adopted differing postures on claim fraud and abuse. Legislative assemblies and state executive branches control the origins, management and financial aspects of their regulatory institutions, and heavily influence the direction of the judiciary emphases. These have not consistently favored greater uniformity in definition of the issue, nor legislative or legal constraints on abuse, although most states express little tolerance for criminal fraud originating in organized rings.

Life Insurance Policy

In this environment each insurer must stake a competitive position. None can afford to ignore the problem of fraud and elect to either absorb the costs or simply pass them along to the users. As an industry-wide problem, individual companies can hope to manage their exposure through their marketing and underwriting practices (market selection, product pricing and choices of distribution decisions), and some may succeed more than others in so doing. That does not totally relieve or islolate them from exposure, however. In the absence of a uniform industry response, AND reinformcent from other system actors, the problem is perpetuated.

The formation of the CAIF in 1993 was no doubt due in part to the recognition that insurers were themselves, neither singly nor best positioned to attack the issue. At a meeting between the CAIF and the Chief Claims Officer Roundtable in Washington, DC, in Fall of 2005, the potential for a national “social marketing” campaign to address the problem was examined. CAIF subsequently published a document outlining issues in need of redress before success may be achieved (CAIF, 2006, p. 39). Those included decisions about whom to target, budgeting, message strategy, organizational structure, and measurement of effects.

This paper concludes by reviewing a limited amount of evidence on social marketing campaigns.



To cite this document:
William C. Lesch, Bruce Byars, (2008) "Consumer insurance fraud in the US property-casualty industry", Journal of Financial Crime, Vol. 15 Issue: 4, pp.411-431, doi: 10.1108/13590790810907245