Insurance Fraud (Business Decision Making Project - Final Collaboration) Running head: INSURANCE FRAUD (BUSINESS DECISION MAKING PROJECT - 1 INSURANCE FRAUD (BUSINESS DECISION MAKING PROJECT - 5 Insurance Fraud (Business Decision Making Project - Final Collaboration) Insurance fraud is something that affects all aspects of insurance. Fraud, according to merriam-webster.com, is “using dishonest methods to take something valuable from another person.” (2015) in this presentation, we will discuss who is affected by fraud, different types of fraud, why fraud is an issue, and how we can help stop fraud. Consumers, insurance companies, innocent “victims” in accidents, police and district attorneys are all affected by fraud of different types. There are many reasons why insurance fraud is an issue. Insurance companies pay out on fraudulent claims, which then cause premiums to increase for consumers. A study conducted by the Coalition Against Insurance Fraud shows that consumers see an increase of between 13% and 18% annually in premiums as a result of insurance fraud. (insurance-fraud.org, 2015) This means that of every $100 dollars consumers pay in premium, between $11.50 and $15.25 of this is due to insurance fraud. Victims in car accidents can be affected because the insurance company may not pay a valid claim due to fraudulent actions by one or both parties in a loss. Police and district attorneys have to use valuable resources to combat against fraud. The Top Questionable Insurance Claims With insurance fraud being so prevalent the Insurance Information Institute released statistical data on the top questionable insurance claim categories that have been increasing year over year. Personal Property claims take top billing when it comes to fraud claims. Included in this section is homeowners insurance and renters insurance. Not only in the residential world do we have claims but in the business world as well with Commercial property claims coming in second place and workers compensation claims comes in a strong third place. These claims seem to be easier to get away with fraud due to the lack of property or injuries that can be claimed. Data analysis The total cost of in the United State is estimated by $ 40 Billion a year which cuts the insurers profits and limits their ability to offer consumers competitive premiums. The data analysis shows that insurance fraud among serious citizen. In addition, and according to the Insurance Fraud organization (2015), the auto insurance fraud $4.8 billion to $6.8 billion in excess payments to auto injury claim. Worker's compensation insurance fraud including employees misclassified by employers increased from 106,000 workers to more than 150,000 workers, schemes that stole $489 million in workers compensation premiums. In the Health care industry, data shows fraud account is increasing by 19% annually as of 2007. The fraud increased from $600 to $800 Billion in waste in the U.S hea.

1. Insurance Fraud (Business Decision Making Project - Final
Collaboration)
Running head: INSURANCE FRAUD (BUSINESS DECISION
MAKING PROJECT -
1
INSURANCE FRAUD (BUSINESS DECISION MAKING
PROJECT -
5
Insurance Fraud (Business Decision Making Project - Final
Collaboration)
Insurance fraud is something that affects all aspects of
insurance. Fraud, according to merriam-webster.com, is “using
dishonest methods to take something valuable from another
person.” (2015) in this presentation, we will discuss who is
affected by fraud, different types of fraud, why fraud is an
issue, and how we can help stop fraud.
Consumers, insurance companies, innocent “victims” in

2. accidents, police and district attorneys are all affected by fraud
of different types. There are many reasons why insurance fraud
is an issue. Insurance companies pay out on fraudulent claims,
which then cause premiums to increase for consumers. A study
conducted by the Coalition Against Insurance Fraud shows that
consumers see an increase of between 13% and 18% annually in
premiums as a result of insurance fraud. (insurance-fraud.org,
2015) This means that of every $100 dollars consumers pay in
premium, between $11.50 and $15.25 of this is due to insurance
fraud.
Victims in car accidents can be affected because the insurance
company may not pay a valid claim due to fraudulent actions by
one or both parties in a loss. Police and district attorneys have
to use valuable resources to combat against fraud.
The Top Questionable Insurance Claims
With insurance fraud being so prevalent the Insurance
Information Institute released statistical data on the top
questionable insurance claim categories that have been
increasing year over year. Personal Property claims take top
billing when it comes to fraud claims. Included in this section is
homeowners insurance and renters insurance. Not only in the
residential world do we have claims but in the business world as
well with Commercial property claims coming in second place
and workers compensation claims comes in a strong third place.
These claims seem to be easier to get away with fraud due to the
lack of property or injuries that can be claimed.
Data analysis
The total cost of in the United State is estimated by $ 40
Billion a year which cuts the insurers profits and limits their
ability to offer consumers competitive premiums. The data
analysis shows that insurance fraud among serious citizen. In
addition, and according to the Insurance Fraud organization
(2015), the auto insurance fraud $4.8 billion to $6.8 billion in

3. excess payments to auto injury claim. Worker's compensation
insurance fraud including employees misclassified by employers
increased from 106,000 workers to more than 150,000 workers,
schemes that stole $489 million in workers compensation
premiums. In the Health care industry, data shows fraud account
is increasing by 19% annually as of 2007. The fraud increased
from $600 to $800 Billion in waste in the U.S healthcare system
annually (Fraud organization, 2015).
With a $40 billion bill, collecting data about fraudulent claims
becomes a long and tedious task, of which the benefits of
collection are not without reward. Interpreting the results can
lead to an understanding of its origin, which can be avoided by
using preventive measures to identify and counter fraudulent
claims. "Association Rules graph for Fraud Detection using
sophisticated data mining tools such as decision trees, machine
learning, association rules, cluster analysis and neural networks,
predictive models can be generated to estimate things such as
probability of fraudulent behavior or the dollar amount of
fraud" (Fraud Detection, 2015). By implementing data
collection and statistical analysis practices it is possible to
develop estimated predictions of fraudulent probability. "In
insurance, 25% of claims contain some form of fraud, resulting
in approximately 10% of insurance payout dollars" (Fraud
Detection, 2015). For insurance providers, collecting this data
is their first step toward preventing fraudulent claims, raising
their profitability and being able to offer competitive consumer
rates.
In terms of various parameters or probability distributions,
there are many things that should be considered when
identifying the parameters for fraudulent likelihood such
as: averages, quantiles and performance metrics. Averages may
include the length of a call, average number of calls per month
and average delays in bill payment (Fraud Detection, 2015).
Recognizing trends among those who commit fraudulent claims
may allow the insurers to more easily identify those with a
tendency to commit fraud establishing parameters and

4. establishing probability can aid in reducing the costs of fraud
and auditing by knowing the cues of fraud. "In fraud detection,
wrongly classifying a legitimate claim to the fraud class may
just result in unnecessary auditing cost, whereas missing a
fraudulent claim could lead to a substantial amount of
unnecessary claim payments being made by the insurance
company" (Ai, 2010). Becoming aware of the information,
probability and parameters of fraud occurrences by collecting
data can ultimately help reduce costs, increase profits and
solicit a larger customer base because there is less loss incurred
by the company.
Reference
Insurance Fraud organization (2015). Fraud Statistics. Retrieved
from http://www.insurancefraud.org/statistics.htm#.VS_PI_nF9-
4
Insurance Information Institute. (2015). Retrieved from
http://www.iii.org/fact-statistic/fraud
merriam-webster.com. (2015). Definition of fraud. Retrieved
from http://www.merriam-webster.com/dictionary/fraud
Fraud statistics. (2015.). Retrieved March 29, 2015, from
http://www.insurancefraud.org/statistics.htm#Auto insurance
Fraud Detection. (2015). Retrieved April 20, 2015, from
http://www.statsoft.com/textbook/fraud-detection
Brockett, P., & Golden, L. (2010, April 1). Assessing Consumer
Fraud Risk in Insurance Claims. Retrieved April 20, 2015, from
http://jingai.shidler.hawaii.edu/downloads/assessing-consumer-
fraud-risk-in-insurance-claims.
Running head:
INSURANCE FRAUD (BUSINESS DECISION MAKING

5. PROJECT
-
1
Insurance Fraud (Business Decision Making Project
-
Final Collaboration)
Running head: INSURANCE FRAUD (BUSINESS DECISION
MAKING PROJECT
-
1
Insurance Fraud (Business Decision Making Project - Final
Collaboration)

6. Insurance Fraud (Business Decision Making Project - Final
Collaboration)
Running head: INSURANCE FRAUD (BUSINESS DECISION
MAKING PROJECT -
1
INSURANCE FRAUD (BUSINESS DECISION MAKING
PROJECT -
5
Insurance Fraud (Business Decision Making Project - Final
Collaboration)
Insurance fraud is something that affects all aspects of
insurance. Fraud, according to merriam-webster.com, is “using
dishonest methods to take something valuable from another
person.” (2015) in this presentation, we will discuss who is
affected by fraud, different types of fraud, why fraud is an
issue, and how we can help stop fraud.
Consumers, insurance companies, innocent “victims” in
accidents, police and district attorneys are all affected by fraud
of different types. There are many reasons why insurance fraud
is an issue. Insurance companies pay out on fraudulent claims,

7. which then cause premiums to increase for consumers. A study
conducted by the Coalition Against Insurance Fraud shows that
consumers see an increase of between 13% and 18% annually in
premiums as a result of insurance fraud. (insurance-fraud.org,
2015) This means that of every $100 dollars consumers pay in
premium, between $11.50 and $15.25 of this is due to insurance
fraud.
Victims in car accidents can be affected because the insurance
company may not pay a valid claim due to fraudulent actions by
one or both parties in a loss. Police and district attorneys have
to use valuable resources to combat against fraud.
The Top Questionable Insurance Claims
With insurance fraud being so prevalent the Insurance
Information Institute released statistical data on the top
questionable insurance claim categories that have been
increasing year over year. Personal Property claims take top
billing when it comes to fraud claims. Included in this section is
homeowners insurance and renters insurance. Not only in the
residential world do we have claims but in the business world as
well with Commercial property claims coming in second place
and workers compensation claims comes in a strong third place.
These claims seem to be easier to get away with fraud due to the
lack of property or injuries that can be claimed.
Data analysis
The total cost of in the United State is estimated by $ 40
Billion a year which cuts the insurers profits and limits their
ability to offer consumers competitive premiums. The data
analysis shows that insurance fraud among serious citizen. In
addition, and according to the Insurance Fraud organization
(2015), the auto insurance fraud $4.8 billion to $6.8 billion in
excess payments to auto injury claim. Worker's compensation
insurance fraud including employees misclassified by employers
increased from 106,000 workers to more than 150,000 workers,

8. schemes that stole $489 million in workers compensation
premiums. In the Health care industry, data shows fraud account
is increasing by 19% annually as of 2007. The fraud increased
from $600 to $800 Billion in waste in the U.S healthcare system
annually (Fraud organization, 2015).
With a $40 billion bill, collecting data about fraudulent claims
becomes a long and tedious task, of which the benefits of
collection are not without reward. Interpreting the results can
lead to an understanding of its origin, which can be avoided by
using preventive measures to identify and counter fraudulent
claims. "Association Rules graph for Fraud Detection using
sophisticated data mining tools such as decision trees, machine
learning, association rules, cluster analysis and neural networks,
predictive models can be generated to estimate things such as
probability of fraudulent behavior or the dollar amount of
fraud" (Fraud Detection, 2015). By implementing data
collection and statistical analysis practices it is possible to
develop estimated predictions of fraudulent probability. "In
insurance, 25% of claims contain some form of fraud, resulting
in approximately 10% of insurance payout dollars" (Fraud
Detection, 2015). For insurance providers, collecting this data
is their first step toward preventing fraudulent claims, raising
their profitability and being able to offer competitive consumer
rates.
In terms of various parameters or probability distributions,
there are many things that should be considered when
identifying the parameters for fraudulent likelihood such
as: averages, quantiles and performance metrics. Averages may
include the length of a call, average number of calls per month
and average delays in bill payment (Fraud Detection, 2015).
Recognizing trends among those who commit fraudulent claims
may allow the insurers to more easily identify those with a
tendency to commit fraud establishing parameters and
establishing probability can aid in reducing the costs of fraud
and auditing by knowing the cues of fraud. "In fraud detection,
wrongly classifying a legitimate claim to the fraud class may

9. just result in unnecessary auditing cost, whereas missing a
fraudulent claim could lead to a substantial amount of
unnecessary claim payments being made by the insurance
company" (Ai, 2010). Becoming aware of the information,
probability and parameters of fraud occurrences by collecting
data can ultimately help reduce costs, increase profits and
solicit a larger customer base because there is less loss incurred
by the company.
Reference
Insurance Fraud organization (2015). Fraud Statistics. Retrieved
from http://www.insurancefraud.org/statistics.htm#.VS_PI_nF9-
4
Insurance Information Institute. (2015). Retrieved from
http://www.iii.org/fact-statistic/fraud
merriam-webster.com. (2015). Definition of fraud. Retrieved
from http://www.merriam-webster.com/dictionary/fraud
Fraud statistics. (2015.). Retrieved March 29, 2015, from
http://www.insurancefraud.org/statistics.htm#Auto insurance
Fraud Detection. (2015). Retrieved April 20, 2015, from
http://www.statsoft.com/textbook/fraud-detection
Brockett, P., & Golden, L. (2010, April 1). Assessing Consumer
Fraud Risk in Insurance Claims. Retrieved April 20, 2015, from
http://jingai.shidler.hawaii.edu/downloads/assessing-consumer-
fraud-risk-in-insurance-claims.
Running head:
INSURANCE FRAUD (BUSINESS DECISION MAKING
PROJECT
-

10. 1
Insurance Fraud (Business Decision Making Project
-
Final Collaboration)
Running head: INSURANCE FRAUD (BUSINESS DECISION
MAKING PROJECT
-
1
Insurance Fraud (Business Decision Making Project - Final
Collaboration)