Among the myriad risks faced by life insurers are those to their reputations and balance sheets when affiliated advisors prey on seniors through investment fraud and financial exploitation, as when they improperly steer elderly clients into life settlements, for example.
The industry is also vulnerable to potential losses resulting from fraudulent insurance claims made by customers. And, it turns out, a large number of them are feeling exposed.
Word of this comes from FICO, a provider of predictive analytics and decision management software. In a new survey of 260 U.S. and Canadian insurers, the application developer discloses that insurers feel most vulnerable to “premium leakage” resulting from deliberately falsified or missing information on policy applications.
More than one-third (35 percent) of the survey respondents estimate that insurance fraud costs represent 5-10 percent of their total claims, while 31 percent say the cost is as high as 20 percent. More than half (57 percent) of insurers expect to see an increase in fraud losses this year on personal insurance lines — policies designed to protect individuals and families — while only 5 percent of insurers expect to see a decline in dollar fraud losses on personal lines.
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In the U.S., 42 percent of insurers foresee the Mid-Atlantic States (New York, Pennsylvania and New Jersey) as being hardest hit by personal lines fraud. In Canada, an equal percentage of insurers flag Quebec as hardest hit by personal lines fraud, followed by Ontario at 39 percent.