The Insurance Information Institute of United States of America, in its latest report, has estimated that insurance fraud accounts for 10 percent of the property and casualty insurance industry's incurred losses and loss adjustment expenses, or financial loss of about $30 billion a year.

The institute stated that the fraud may have been committed at different points in the insurance transaction by different parties: applicants for insurance, policy holders, third-party claimants and professionals who provide services to claimants.

It was explained that common frauds include ‘padding’ or inflating actual claims, misrepresenting facts on an insurance application, submitting claims for injuries or damage that never occurred, and ‘staging’ accidents.
Prompted by the incidence of insurance fraud, some states in the USA have set up fraud bureaus. These agencies have reported increases in referrals cases opened, convictions and court-ordered restitution.

According to the institute, in the recent development on home arson, insurers are watching to see if the sub prime mortgage crisis would spur arson by homeowners who face foreclosure. Presently there is no data to show that an increase directly linked to such foreclosures has occurred.

The State Insurance Fraud Bureau Study report indicated that the Coalition Against Insurance Fraud's Progress Report, 2001-2006 found that the major measurements of success, namely referrals received, cases opened and presented for prosecution, convictions and restitution ordered, increased from 2004 to 2005, but results appear to have leveled off in recent years.

For instance, although referrals grew 20 percent during the 2004-2005 period, half of all referrals were logged in three states. The next measure, cases opened, grew 6.5 percent, but the average number of cases opened per bureau has been flat since 2001. Prosecutions and criminal convictions both were up at the same rate, but the average number of prosecutions has been flat and convictions were down at 18 bureaus.

"However, court-ordered restitution increased at most fraud bureaus and totaled $298 million in 2005. The CAIF notes that if all of this money is repaid, the total collected would be twice the operating costs of the 31 bureaus that provided restitution data," it was reported.
"The hurricanes of 2005, especially Hurricane Katrina, resulted in cases of insurance fraud where homeowners or renters made claims for stereos, televisions or other expensive items that they never purchased and where homeowners inflated claims for items actually destroyed.

"Dozens of fires broke out in New Orleans and other affected communities after Hurricane Katrina. Some of these may be the result of arson committed by flood victims who did not have flood coverage. Thousands of flood-damaged cars were cleaned up and resold without disclosing their flood status," the bureau discovered.