CSU's "Dr. Fraud" helps come up with new insurance fraud price tag: $309 billion

Insurance fraud costs the country $308.6 billion a year, a much higher amount than the $80 billion estimated in 1995, according to a new report from the Coalition Against Insurance Fraud that relied heavily on research by CSU Global.

The coalition, when it formed in 1993, commissioned a study to get at the cost of insurance fraud and came up with an estimate of $80 billion, a number that is highly cited. But after 27 years it is both outdated and understated. Adjusting for inflation, that original number would be $155 billion in today's dollars

The original estimate didn't include additional insurance lines now tracked by the coalition, which includes 270 member organizations including the FBI, Department of Justice, state insurance departments and every major insurance carrier. The new numbers include health care, workers' compensation, and life and disability insurance.

To calculate an updated number, the coalition turned to J. Michael Skiba, program director of criminal justice at CSU Global in Denver who has the nickname of "Dr. Fraud" within the insurance industry. Skiba has argued that insurance fraud is viewed as a low-risk and high-reward offense that takes a heavy toll on society. Insurers bear the cost initially, but those costs are then passed through to customers in terms of higher premiums.

That fraud estimate works out to $932.63 per year for every person in the U.S. Across someone living the average number of years, those losses work out to $73,491, according to Matthew Smith, executive director of the coalition.

Below is a breakdown of the larger fraud number that Skiba helped calculate:

* Property and casualty insurance fraud — $45 billion

* Worker's compensation fraud — $34 billion

* Premium avoidance fraud — $35.1 billion

* Life insurance fraud — $74.7 billion

* Medicare and Medicaid fraud — $68.7 billion

* Healthcare fraud — $36.3 billion

* Disability fraud — $7.4 billion

* Auto theft fraud — $7.4 billion

Although auto theft isn't technically a direct form of insurance fraud, unless the owner is in on the act to collect money, it is an insurance crime that extracts a heavy cost on consumers and was included in the larger estimate.

Colorado stands out in this area with the fourth-highest number of auto thefts in the country at 30,452 in 2020, way beyond what would be expected given its population ranking of 21st.