Quantifying the extent of insurance fraud is difficult because much of it goes undetected. However, health and auto insurance, and Workers' Compensation are believed to be most susceptible to fraud. Estimates on fraud vary by sources, and include:

• According to a 1996 Conning & Co. insurance fraud study, "Insurance Fraud: The Quiet Catastrophe," it's estimated that P/C insurers detect about 20% of their fraud, while life/disability insurers find about 10% and health care insurers a mere 1%. The study estimates that fraud cost the entire insurance industry $120 billion in 1995.
• InfoGlide Corp., an Austin, Texas-based software firm specializing in software that detects fraud patterns, reports that Medicare/Medicaid fraud was in excess of $70 billion in 1997, way above government and insurance industry estimates of $44 billion. The company estimates fraudulent auto insurance scams at $16 billion, about 50% more than the industry estimates for 1997.
• The Insurance Information Institute estimates that P/C insurance fraud cost insurers $21 billion in 1998.
• The National Insurance Crime Bureau (NICB) estimates that 10% of all 1996 P/C claims had fraudulent elements, costing policyholders an estimated $200-$300 a year in added premiums.

Estimated claims fraud losses in 1997 both nationally and for Ohio are provided in the charts to the right from the Coalition Against Insurance Fraud (CAIF). The overall insurance fraud picture seems to be improving, based on data for the last three of the six years of the CAIF study. US fraud claims estimates for 1997 total $79.7 billion, compared to $85.4 billion in 1996 and $85.3 billion in 1995. 1992 fraud claims estimates were $67.7 billion. Ohio claims fraud estimates also improved slightly. CAIF overall estimates for Ohio in 1997 are $4.O billion, compared to $4.3 billion in 1995 and 1996.

Insurance fraud activities can be either internal or external. External fraud includes activities committed by insurance applicants, policyholders, third-party claimants or those who provide services to claimants. External fraudulent activities range from inflating or "padding" claims to submitting claims for injuries or damages that never occurred. Staged accidents, a form of external fraud, accounted for 3% of fraudulent claims in the 1996 Conning study.

Internal fraud, as the term implies, occurs within the insurance industry itself and includes misrepresentation of the facts by industry employees for personal gain or to prevent regulators from taking certain actions. It also includes outright bribery.

Note: These figures are estimates of claims fraud occurring in 1997, including the per individual, household and family data. These figures do not include any costs related to the detection, investigation or prosecution of insurance fraud, nor has there been any attempt to estimate the amount of insurance fraud committed by insurers or those purported to represent the insurance industry.

The P/C figures are derived from the Insurance Information Institute. The estimated fraud percentage used for homeowners and most business/commercial claims was 10%, which most experts accept as a reasonable, even conservative, figure. The sources on health-related claims are twofold. The Health Insurance Association of America provided the information for private insurance claims, which was added to the claims numbers for Medicare and other federal programs, furnished by the Health Care Financing Administration.

The battle against insurance fraud depends on resources devoted by the industry to detect fraud and the level of priority that it's given by legislators, regulators, law enforcement agencies and society to expedite its eradication. The IRC study reported that insurers spent over $650 million to combat fraud in 1996, up from $200 million reported in 1992. 82% of the companies surveyed expected to increase spending through 1999, and a quarter said expenditures would increase by 10% or more.

Some of the measures used to combat fraud include:

• Consolidation of computerized data bases (index systems) that identify patterns of suspected activity including false claims and payment duplication. The Insurance Services Office (ISO) acquisition of the American Insurance Services Group and the NICB data bases, combines three significant data bases covering vehicle-related, bodily injury and Workers' Compensation and property loss claims. The new system, ClaimSearch, uses information collected from 2,900 insurers. In late 1999, ISO announced internet access to its data base for ease in claims investigations.
• Increased use of SIUs (special investigation units) to help identify and investigate suspicious claims. The number of SIUs grew throughout the 1990s. There were at least 4,220 SIUs in 1996 compared to 1,505 in 1992, according to the 1996 IRC fraud study of 150 insurers representing 77% of the market. In recent times, there appears to be a softening in antifraud efforts and SIU staffing, according to CAIF.
  
  SIUs range from small teams that train claims representatives to trained investigative teams that include law enforcement officials, accountants, claims experts and attorneys.
  
  Some companies in recent times have turned to outsourcing SIUs. Some in-house fraud investigators now serve as independent contractors. As far as return on the dollar, previous estimates indicated that on average companies saved $10 for every dollar invested in SIUs. Currently insurers differ on how antifraud successes are measured. Some use returns on investments; others use more complex formulas involving expenses and salvage parts.
• Filing civil lawsuits, which insurers do under the federal Racketeering Influenced and Corrupt Organizations (RICO) Act. It requires proving a preponderance of evidence rather than the stricter rules of evidence required in criminal actions and allows for triple damages.
• Growth in state fraud bureaus, with the assistance of insurance companies. There are 44 fraud bureaus operating in 36 states; most are in state insurance departments, including Ohio's. The following state insurance fraud bureau statistics are provided by CAIF:
  - The total number of convictions stemming from fraud bureau investigations totaled 1,800 in 1998, nearly triple the 1995 figure of 663.
  - Civil actions pursued by fraud bureaus more than doubled from 549 in 1995 to about 1,300 in 1998.
  - Fraud bureaus received over 92,000 referrals or complaints about suspected fraudulent activities in 1998, a 50% increase from 1995's total of 61,321.
  - In 1998, fraud bureaus presented about 3,200 cases to prosecutors, up nearly 50% from 1995 when 1,614 cases were presented.
  
  In 1998, the Ohio Department of Insurance (ODI) Fraud Division opened 119 cases, took 53 cases to prosecution and had 69 felony indictments and 33 convictions. ODI's confidential fraud hotline number is 1-800-686-1527.
• Fraud legislation: Fraud legislation has been enacted in at least 20 states, including Ohio, with more targeted by CAIF in the upcoming year.
  
  Am. Sub. HB 248, Ohio's fraud bill, was enacted in March, 1998. It requires insurers to adopt antifraud programs that include written procedures for pursuing insurance fraud. It also requires companies to report those suspicious of fraud to the ODI. The bill also includes legislation allowing ODI access to the Law Enforcement Automated Data System (LEADS) to assist in its efforts to combat fraud and other suspected criminal activities.