Expert Commentary

Insurance Fraud: The Orphan Child of the U.S. Justice System

I am tired of those who give lip-service to the need for insurers to defeat insurance fraud. I am frustrated by those judges who give probation to admitted insurance criminals.

Claims Practices
October 2007

Every month Zalma's Insurance Fraud Letter (ZIFL) publishes lists of prosecutions and the wild variations in sentences imposed on people who commit almost identical crimes. According to the Coalition Against Insurance Fraud:

Insurance fraud occurs every day and in every state. People of all races, incomes and ages are victimized. ...

Insurance fraud is hard to measure because so much goes undetected, and complete research has yet to be done. Still, we have enough evidence to know that fraud is widespread—and expensive. Insurance fraud is an equal opportunity crime. It is committed by members of every race, religion, or country of origin. Insurers and those who pay premiums for insurance are the victims. Police and prosecutors ignore the crime and expect insurers to investigate and help prosecute the crime.

Insurers and those who buy insurance should both be screaming at the top of their lungs to their legislators, police, and prosecutorial agencies that the crime must be stopped. They do not. Because of a lack of interest on the part of the public, prosecutions happen rarely and the punishment is spotty and widely diverse. Check the "Good News" section in ZIFL at and you will see punishments from zero jail time to 15 years in prison. The deterrent effect of fraud prosecutions is inconsequential since most people get away with it.

A Proposal

I propose a major advertising campaign explaining to the public, prosecutors, judges, and juries how much they personally spend every year to allow fraud perpetrators to continue their practice. Insurers who spend billions on advertising their product could take a mere 1 percent of their advertising budgets to ask the public to help fight fraud, turn in fraud perpetrators, demand that they be prosecuted and demand that the judges put them in jail.

Regardless of how effective an insurer's special investigative unit (SIU), without the support of the public, press, prosecutors, and judges, insurance fraud will remain the orphan child of the U.S. justice system. Until insurance fraud prosecution is adopted as the cause of the majority of the public, it will continue to succeed.

Nothing will happen until the public and public servants are convinced it is a serious problem. Ask your local prosecutors what they would do if a gang was robbing American banks on a daily basis of $100 billion every year. Would they create a special task force to catch and prosecute the criminals? Why do they do almost nothing about those who steal the same amount from insurers with their pens rather than with guns? It is time the insurance industry and all who work in it demand that insurance fraud be recognized as a major crime and that those who are convicted be sentenced to the most severe punishments allowed by law.

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