Facing Down Fraud with Words & Deeds Florida Property/Casualty Fraud Task Force July 10, 2014 Download at www.iii.org/presentations Lynne McChristian, Florida Representative Insurance Information Institute 110 William Street New York, NY 10038 Tel: 813.480.6446 lynnem@iii.org www.insuringflorida.org www.iii.org
About Us The Insurance Information Institute was founded more than 50 years ago to improve the public understanding of insurance what it does and how it works. The I.I.I. is a primary source for information, analysis and referral concerning insurance topics. www.iii.org www.insuringflorida.org We are a resource for consumers, media, insurers and researchers. 2
Examples of What the I.I.I. Offers 3
Return on Equity: Property/Casualty Insurance vs. Fortune 500, 1987 2013E* (Percent) 20% P/C Profitability Is Both by Cyclicality and Ordinary Volatility Katrina, Rita, Wilma 15% 10% Sept. 11 Low CATs 5% 0% -5% Hugo Andrew Northridge Lowest CAT Losses in 15 Years 4 Hurricanes Financial Crisis* Record Tornado Losses Sandy 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13E * Excludes Mortgage & Financial Guarantee in 2008 2013. 2013 Fortune 500 figure is I.I.I. estimate. Sources: ISO, Fortune; Insurance Information Institute. 4
Direct Premiums Written: Total P/C Percent Change by State, 2007-2013 Top 25 States Pecent change (%) 80 70 60 50 40 30 20 10 74.6 36.9 31.9 27.4 25.2 24.9 22.5 22.2 16.6 15.9 North Dakota was the country s growth leader over the past 6 years with premiums written expanding by 74.6% 15.7 14.5 14.5 14.3 12.6 11.9 11.8 11.2 10.5 10.3 9.9 9.8 9.3 9.1 9.0 8.6 0 ND SD OK NE KS IA VT TX WY TN MN AR AK IN WI CO MI KY OH NJ LA SC VA AL MO NM Sources: SNL Financial LC.; Insurance Information Institute. 5
Direct Premiums Written: Total P/C Percent Change by State, 2007-2013 Bottom 25 States Pecent change (%) 10 5 0-5 -10-15 -20 8.5 MS 8.2 CT 7.9 US 7.8 NC 7.6 GA 7.3 NY 7.0 6.9 6.2 5.9 5.6 5.3 4.2 4.1 3.5 Growth was negative in 8 states, including Florida. MD MA UT WA PA IL RI NH ID 1.6 MT 1.0 ME 0.4 OR -0.7 CA -1.7 FL -1.9 DC -4.1 AZ -5.7 WV -6.7 HI -12.6 NV -15.3 DE Sources: SNL Financial LC.; Insurance Information Institute. 6
Top States by Inflation-Adjusted Insured Catastrophe Losses, 1983 2012 Over the past 30 years, Florida has accounted for the largest share of catastrophe losses in the U.S., followed by Texas and Louisiana. Louisiana $42.0B Texas $48.8B 9.0% 10.4% Florida $66.7B 14.3% 66.3% Rest of the U.S. $309.9B Total: $467.5 Billion, an average of $16.6B per year or $1.3B per month Source: PCS unit of ISO, Verisk Company.; Insurance Information Institute. 7
Questionable Claims On the Rise Message: Fraud Activity is Growing and So Are Fraud-Fighting Efforts. 8
Questionable Claims, Top 10 Loss States, All Lines: 2010 2012 (Number of Questionable Claims) 25,000 20,000 +28.3% 17,092 19,388 21,935 California had the largest number of Questionable Claims in 2012; Florida ranks second 22.6% increase over two years. 2010 2011 2012 15,000 10,000 5,000 +22.6% +37.9% 8,723 9,670 10,693 7,520 8,016 10,368 +29.1% 7,015 7,328 9,059 +72.9% +39.3% +37.1% +0.8 +53.3 +50.0 2,485 3,535 4,296 2,961 3,614 4,126 2,812 3,163 3,855 3,511 3,255 3,538 2,187 2,617 3,353 2,193 2,621 3,289 0 CA FL TX NY MD GA NC IL PA OH Source: National Insurance Crime Bureau, ForeCAST Report, May 10, 2013; Insurance Information Institute 9
Questionable Claims, Top 10 Loss Cities, All Lines: 2010 2012 (Number of Questionable Claims) 6,000 5,000 4,000 3,000 2,000 1,000 3,999 +28.5% 4,425 5,140 2,093 +55.1% 2,440 3,246 1,195 New York City had the largest number of Questionable Claims in 2012, but Florida is the only state with two metro areas in the Top 10 - Miami and Orlando. +93.2% 1,999 2,309 1,693 +18.7% +99.0% 1,761 2,010 801 1,295 1,594 1,167 +19.8% -27.7% 1,240 1,398 1,548 1,341 1,119 629 +63.8 750 2010 2011 2012 1,030 488 +82.8 +1.2 574 892 867 858 877 0 New York Los Angeles Miami Houston Baltimore Chicago Detroit Philadelphia Dallas Orlando Source: National Insurance Crime Bureau, ForeCAST Report, May 10, 2013; Insurance Information Institute 10
Questionable Claims, Top 10 Policy Types: 2010 2012 (Number of Questionable Claims) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 +24.9% 62,481 69,219 78,024 Pvt. Pass. Auto +47.1% 11,677 11,877 17,183 Personal Prop.: HO Private Passenger Auto had the largest number of Questionable Claims in 2012, but Personal Property (Other) led the way in growth, with the number of QCs more than tripling from 2010 to 2012 +38.4% +2.4% +15.3% +205.1% 3,222 3,470 4,459 WC & EL 2,866 3,052 3,554 Comm. Auto 2,298 2,571 CGL 2,650 859 1,090 2,621 Personal Prop: Other 698 698 941 Comm. Prop: CMP 357 387 464 Comm. Liab: Bus. Owners 2010 2011 2012 +34.8% +30.0% -10.1% +6.0% 457 488 411 Pers. Prop.: Fire 383 325 406 Comm. Prop: Bus. Owners Source: National Insurance Crime Bureau, ForeCAST Report, May 10, 2013; Insurance Information Institute 11
Task Force Public Outreach Strategies for Discussion 12
Stakeholder Focus Who are our audiences? Rank their importance to Task Force goals. Prosecutors Law Enforcement General Public Insurers Government/Regulatory Bodies Media Contractors, Remediation Companies Others? Decide: Which audiences require face-to-face meetings? Need a strategic approach for each audience. 13
Insurance fraud is a crime. Showing that crime doesn t pay. Some current activities: Law enforcement uses social media as a type of police blotter with mug shots. State CFO s office issues press releases of arrests. Promotion of Fraud Tipster phone lines. NICB reports and media outreach. Educational videos on fraud detection & prevention. Dept. of Insurance Fraud annual report and statistics. Reposting the above on Stomp Out Fraud Face Book page. 14
Research needed into fraud deterrents There has been no specific study of words that work to deter insurance fraud. Audiences, and criminal participants, are diverse. Most education efforts now are one-size-fits-all. White collar criminals deterred by photos of a guy in a suit & tie being handcuffed. Not so for others? Who has been arrested vs. who has been sentenced. The Coalition of Insurance Fraud says 20% of Americans have few qualms about bilking insurers. In a state like Florida, with the highest property insurance rates in the U.S., that number may be higher. 15
Opportunities Let s try positive messages! Tout effective anti-fraud controls that insurers use. Profile of a fraudster. Focus on education about not being a victim. Be out front after disaster. Consider a Fraud Fighters Press Event immediately after a hurricane. Help keep people alert to opportunistic fraud. In other words, look for teachable moments. Continually stress that insurers fight fraud because it s the law AND it keeps the consumer costs in check. It is NOT to avoid paying legitimate claims. 16
Insurers Making a Difference Highlight individual company efforts post-disaster to fight fraud. Share details of successful prosecutions. Tell your story about the investigative process. Stories are remembered! 17
Using social media effectively What we say and what the public hears are not always aligned. Always pointing to bad guys getting caught may send a signal that is not intended. Can we catch people doing something good? Need real life stories! Use your own Twitter account to share Task Force news. Social media is for friends and foes alike. It s not all happy talk. Listening to industry critics helps us improve our communication efforts. Remember: It s a team effort! 18
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