The Last Word
Millions of Americans lie on their insurance applications, but technology is helping insurers identify mistruths and curb insurance fraud.
- Lori Chordas
- August 2019
Nearly 35 million Americans admit to having lied on insurance applications, according to a study by personal finance website www.finder.com.
The study, which examined the behaviors of more than 2,000 respondents, found that 10.2 million Americans have lied when applying for auto insurance. Another 7.5 million consumers have been dishonest on their health insurance applications and 7.3 million Americans admit to lying when applying for a life insurance policy.
Men are more likely than women to deviate from the truth when applying for auto and life insurance coverages, the survey showed. Females, however, are more apt to lie on their health, travel and pet insurance applications, and they're three times more likely to provide mistruths in auto insurance forms than homeowners' applications, said Finder US CEO Jon Brodsky.
“We were surprised to discover that renters have a higher likelihood than homeowners to lie on their auto, life and pet insurance applications,” he said.
“Also surprising is that states with a large population of retirees, such as Texas and Florida, tend to have a higher pool of applicants who lie on their insurance applications,” Brodsky said.
One-quarter of Arizona residents admit to lying or omitting information on insurance applications, followed by 22% of Californians and 20% of residents in Ohio, he said.
Annual cost of non-health-related insurance fraud.
Finder didn't survey respondents about the types of lies they tell on their applications so not to bias the results. “Anecdotally, I can tell you that some of the questions we receive from customers include whether they should disclose information about having a disease such as diabetes or participating in risky activities such as scuba diving or skydiving,” Brodsky said.
Insurance fraud, including lying on insurance applications and failing to report an auto accident to an insurer, is on the rise. The annual cost of non-health-related insurance fraud now tops $40 billion, leaving American families to shoulder anywhere from $400 to $700 in annual increased premiums, according to the FBI.
Fraud accounts for 5% to 20% of insurers' claims costs in the United States and Canada, according to predictive analytics and decision management software company FICO.
Insurance fraud is a specific crime in 48 states, along with the District of Columbia. Virginia and Oregon are the only states without an insurance fraud law.
Insurers are using advanced analytics tools to combat this growing problem.
More than 60% of insurers expect to earmark funds for predictive analytics tools, 43% have planned investments in link and social media analysis, and 21% will invest in artificial intelligence in the next 24 months, according to the Coalition Against Insurance Fraud, a national alliance of organizations dedicated to combating insurance fraud through advocacy, outreach and research.
“Liars will get caught,” Brodsky said. “And even if they don't the first time, they will someday. Everything eventually comes home to roost.”
While fraudsters will continue to prey on insurers, Brodsky is hopeful the problem will soon improve.
“As insurers adopt technologies like blockchain, machine learning and decentralized databases, those capabilities will provide much deeper insights and a better view of risks and allow insurers to share that information with others in the industry to help drive out fraud,” he said.