Survey Finds Younger Generations Have a Higher Tolerance For Insurance Fraud – What Insurers Should Know


When you really stop to think about it, it’s not so hard to believe that the lines once standing between what is right and what is wrong are no longer as clear as they once might have seemed.

There has been a great erosion of trust, and institutions that once might have been thought of as friendly are no longer viewed the same way. Without trust, relationships lose value and become less cooperative and more adversarial.

A recent study done by Verisk, a data analytics provider for the insurance industry, in cooperation with the Coalition Against Insurance Fraud, suggests upcoming generations are more willing to view insurance as money available for the taking and less as equitable compensation for an insured loss.

How Big of a Problem is Insurance Fraud?

Insurance fraud has an annual impact on the economy of more than $300 billion, according to the Coalition Against Insurance Fraud. Most states make insurance fraud a crime that becomes more serious as the dollar values increase.

In Texas, insurance fraud is committed when false information is presented to an insurance company with the intent to deceive in order to gain a benefit. The following are commissions of insurance fraud under Texas law:

  • Presenting a claim for payment that is known to contain false information
  • Knowingly providing false information on an insurance application
  • Making a claim for the lost value of goods or services after having received payment

What the Survey Found about Attitudes Toward Insurance Fraud

A key focus of the “Who Me?” study report was whether Americans viewed insurance fraud as a crime. Demographics were targeted to ensure representation of adults in all age groups. Overall, the responses indicated that 84 percent of Americans still think insurance fraud is a crime.

However, the oldest Americans felt more strongly about insurance fraud being a crime than the youngest American adults. Over 95 percent of those ages 55 and above agreed insurance fraud was a crime, while just 65 percent of those ages 18 to 25 felt the same way.

The study points out that 16 percent of Americans believe insurance fraud is not a crime. Nearly 53 million people can justify taking money from an insurance company when it is not owed to them.

Why Insurance Fraud is Becoming More Mainstream

Of those people who did not believe insurance fraud was a crime, the reasons given indicate a general mistrust of insurance companies and a misunderstanding of how the insurance business works. The following responses were given to justify insurance fraud:

  • Get them before they get you – insurance companies rip people off
  • I’ve paid in – I deserve to take some out
  • Under no circumstances is taking money from an insurance company a crime

There is a Willingness to Commit Insurance Fraud

Not only do younger generations indicate a willingness to tolerate insurance fraud, but a good number also admit a willingness to engage in insurance fraud if certain opportunities present themselves. Study participants were asked about four different insurance claim situations and making fraudulent claims:

  • Would you submit a claim for preexisting vehicle damage after an accident?
  • Would you include prior structural damage with a property claim for storm damage?
  • Would you submit an injury sustained on personal time as a work injury?
  • Would you submit a medical bill for services not received?

The responses showed a clear demarcation between those ages 45 and older and those 18 to 44. Indicative of the findings in response to all four questions, when asked whether they would definitely include a claim for preexisting vehicle damage along with an accident claim, the study participants responded affirmatively as follows:

  • Ages 65+ – 1.27 percent
  • 55 to 64 – 2.16 percent
  • 45 to 54 – 7.08 percent
  • 35 to 44 – 20.60 percent
  • 25 to 34 – 22.74 percent
  • 18 to 24 – 23.44 percent

Some Even Believe Insurance Fraud is Justified

When asked whether insurance companies make too much money at the expense of consumers, 29 percent of the study participants completely agreed with the statement. Another 36 percent said insurance companies that don’t pay legitimate claims commit the most insurance fraud. Over 52 percent of those surveyed believed the government would be the primary payer of fraud costs.

The survey results identify the top two reasons insurance fraud occurs as being:

  • Improper actions taken by insurance companies
  • Honest people being forced to commit fraud to get fair payment

A policy deductible that is too high was a moderately to very acceptable reason to commit insurance fraud for 47 percent of those surveyed. Justifying insurance fraud because a policy premium is too high was more than slightly acceptable for 48 percent of the participants. A lesser but still significant 42 percent thought insurance fraud was acceptable because an insurance company can afford to absorb the loss.

What Insurance Companies Are Doing to Identify and Prevent Fraud

One of the biggest obstacles for insurance companies has been access to timely and adequate data to help detect fraud. Technological solutions for insurance fraud detection are making more data available more quickly and using the data to predict the likelihood of fraud.

A recent study by FRISS (First Responders Integrated Support System) on the performance of fraud detection software got feedback from over 400 insurance professionals worldwide on the following benefits:

  • 59 percent reported an improved loss ratio
  • 53 percent reported they were able to detect developing fraud schemes
  • 52 percent reported the software improved investigation efficiency

A Law Firm Advocating for Insurance Companies in Texas

Despite an apparent perception by many younger Americans that insurance fraud only hurts insurance companies, insurance fraud actually hurts insurance consumers. Insurance fraud causes insurance companies to need to raise premium rates to cover anticipated fraud losses.

The attorneys at MehaffyWeber have been litigating on behalf of insurance companies for more than 70 years. We defend insurance companies on a wide range of legal matters, including personal injury, property damage, and contract disputes. Contact MehaffyWeber in Houston, Beaumont, San Antonio, and Austin.