Insurance fraud comes in many different forms, from creative and complicated to simple and childlike.  In the U.S., insurance fraud costs about $30 billion per year, or 10% of the total losses paid out by insurance companies.  And while some people may cheer this activity on, thinking that the large insurance companies deserve a little fraud since they are so big and heartless, these people are forgetting that these costs just end up in everyone else’s premiums.  So if we could get rid of insurance fraud completely, you could expect to pay 10% less for every kind of insurance policy that you buy.

Until recently, solving insurance fraud claims has been a slow and difficult process.  But social media sites, like Twitter, Facebook, Linked In and others are providing a wealth of information and clues to investigators.  Take a look at a few of these real world examples to see just how these social media sites are helping investigators catch and stop some of the insurance fraud criminals out there.

Let’s start with a case of fraud that doesn’t include an insurance company to see how powerful these tools can be.  A woman worked in the payables department of a large firm that had awarded a maintenance contract to a firm that was secretly run by her husband.    The husband then began billing for services that were not actually performed and the wife paid them on behalf of the firm.  This kind of fraud would be nearly impossible to detect.  But the investigator cross referenced information from all of the social media sites with traditional sources such as the white pages and eventually found an address associated with the maintenance firm that matched an address of one of the couple’s grown children.    This allowed him to connect the two put an end to their fraud.

Workers compensation insurance is the area of insurance that has perhaps gained the most from these sites.  An injured worker, out on disability post photos of himself on top of a mountain in Aspen ready to ski down.  Another disabled worker left social media trails that led to him playing basketball in an adult basketball league.  Instead of having to hire an investigator to follow him around everywhere, the insurance company can now just have the investigator show up at the game and witness the disabled worker playing basketball.  The fraud is stopped and the investigation costs are reduced.  Or consider the case of a worker who was out on disability for a back injury that posted photos of himself at a karate class, thereby ending his disability workers compensation claim.

Relationships between different players in fraud can also be discovered using social media.  A doctor and an attorney who were involved in a scam together turned out to be connected on Linked In and it was later found that they were tweeting to each other to set up meetings to work out their next moves.  In one case, an investigator of a slip and fall claim that seemed suspect, found that 2 other people living in the same apartment with the victim were also victims of slip and fall claims.  It turns out that only the first of these claims was legitimate and that the other two took their knowledge of this one incident to fabricate their stories to set up their fraudulent insurance claims.

Even Craigslist is a part of this action.   One fraudster filed an auto insurance claim that his car had been stolen.   Several months later he was listing that car for sale on Craigslist.  In another example, a person filed a claim for their car that had been burned and investigators later found several earlier ads on Craigslist where this person had tried unsuccessfully to sell the car.  I guess he decided it would be easier to burn it and collect the insurance money.

All of these sleuthing techniques will help keep your insurance costs lower over the long term.  If you want to cut your insurance costs dramatically in the short term, then I suggest that you call Clinard Insurance Group, toll free, at 877-687-7557 and let us help you find the policy that suits your needs at a rate that will shock you.

Hurricane Sandy struck the northeastern US with a severe blow and the clean-up that is going on now will probably continue for many weeks more.  Most of us in North Carolina were spared damage to our homes and property but did you know that despite this, hurricane Sandy will have an impact on your future home insurance rates?  And if Sandy represents a changing weather pattern for the long term, then over time we may pay as much for our home insurance in North Carolina as homeowners now pay in Florida.

The rates that you pay for your home insurance are generated by data from many different sources and as such are affected by many things.  But as far as weather related losses such as hurricanes go, there are really three ways that you can be affected negatively.  Let’s take a look at each of them separately.

The most obvious type of impact would be when your home or property suffers a direct loss from a storm and you have to file a claim.  Most insurance companies will allow some number of weather related claims to be filed before they take the more drastic step of non-renewing your policy.  This used to be as many as three claims though lately with tougher underwriting and lower profits in NC, some now won’t tolerate even one weather related loss without at least requiring that you increase your deductible.  Many might just not renew your policy after one weather related loss.

A second, less obvious way that your rates are affected by storms happens when a storm hits your local area.  Even though your home may be spared the damage, the storm track through your neighborhood or your town puts that locale on the map for higher risk areas with insurance companies.  When they pay out for a lot of losses in an area, you can bet that they start to train their attention on that area and begin to work to get more rate increases in that geography.  So even though you dodge the bullet of storm losses, you may not dodge the rate increase bullet caused by that local storm.

The third way that storms affect your homeowners insurance rates is caused by the fundamental mechanism of how insurance spreads losses around.  In a sense, when you purchase home insurance you are substituting a smaller know loss (your premiums) for a larger unknown one (storm damages to your home).  One of the ways that he insurance industry spreads this risk around is through the use of reinsurance contracts.  Reinsurance is insurance protection that insurance companies purchase from reinsurance companies for  their entire book of business.  For example, an insurance company might sign a reinsurance contract with a reinsurer that says that if they suffer losses from any one storm that exceed $300 million then the reinsurer will pay for all claims over that amount.  Now when large storms hit the US and cause extensive damage, the reinsurers have to pay out on their contracts with the insurance companies.  When this happens, the future costs of reinsurance will be higher as the reinsurers attempt to cover past losses and also make sure that they are profitable in the future.  These higher reinsurance costs are then passed on down to the homeowners insurance consumer.

With a storm like Sandy, where the loss of property is extensive and widespread, future insurance costs are bound to be affected negatively.  For most NC residents, the rate impact will only come from the third leg of this stool so our negative rate impact will certainly be much lower than areas of New Jersey and New York.  But make no mistake; this storm will cost all of us more money in higher insurance premiums.

At Clinard Insurance Group, we want to help you with all of your insurance needs.  Please feel free to call us toll free, at 877-687-7557 if you have any questions about your personal or your business insurance.  We are here to help you.