Top 3 fraudulent schemes targeting insurers [infographic]

When it comes to fraud, what is the cost of complacency? Research conducted by the Association of Certified Fraud Examiners (ACFE) indicates that the longer a fraud lasts before it is detected, the more the victim organization stands to lose.

The infographic on the next page illustrates the relationship between anti-fraud controls and the duration and cost of fraud. The data was compiled by the ACFE for its 2014 “Report to the Nations on Occupational Fraud and Abuse.”

The following are highlights from the report about fraud and internal controls:

• Insurers account for 4.5 percent of organizations that have been victimized by fraud.
• Insurers are the 7^th most victimized companies by industry, behind banking and financial services (17.8 percent), government and public administration (10.3 percent), manufacturing (8.5 percent), healthcare (7.3 percent), education (5.9 percent) and retail (5.6 percent).
• The three most common schemes suffered by insurers include corruption (33.9 percent of cases), skimming (22.6 percent) and billing (17.7 percent).
• The median loss incurred by insurers resulting from 62 reported cases of fraud totals $93,000.
• The median loss caused by frauds in the ACFE study was $145,000. Additionally, 22 percent of the cases involved losses of at least $1 million.
• The median duration — the period of time from when the fraud commenced until it was detected — was 18 months.
• Frauds discovered by passive detection methods (such as confession, notification by law enforcement, external audit and by accident) lasted longer and resulted in higher losses.
• By contrast, frauds discovered through proactive detection methods (such as hotlines, management review procedures, internal audits and employee monitoring mechanisms) were caught sooner, with fewer financial losses.

The 2014 Report to the Nations includes data compiled from 1,483 cases of fraud submitted by CFEs globally. The full report is available here.