November 12-18 is International Fraud Week. Once a year, the Association of Certified Fraud Examiners (ACFE) organizes a week to highlight the far-reaching consequences of fraud, educate business owners, and raise anti-fraud awareness. 

How does this apply to the insurance industry and affect you, your insurance rates, and your coverage?  Let’s dive into how fraud affects the insurance industry in Florida and some fundamentals of fraud prevention. 

What is Fraud?

Fraud is an attempt to deceive for financial or personal gain, and it costs companies an average of 5% of their revenue a year. This definition covers a wide range of criminal behavior. Some common types of fraud are identity theft, occupational fraud, and insurance fraud.

A common misconception about fraud is that it is a victimless crime. While it’s true that there isn’t any physical damage done to the victims of fraud, it can affect people’s livelihoods, a company’s reputation, and customers of defrauded companies. 

Fraud and Florida

Florida in particular has suffered heavily from fraud over the last 20 years. It’s ranked the 3rd worst state in terms of auto fraud, and, even if you don’t live in Florida, you’ve probably heard of the number of scams, fraud activity, and more that it experiences. 

Insurance is one of the top 10 industries impacted by fraud, costing an estimated $40 billion a year, excluding health insurance fraud. The unique thing about insurance fraud is that insurers have a way to pass their losses onto the customer. They can raise premiums! Because of this, it’s estimated that insurance fraud losses cost the average American family $400 to $700 a year.

Homeowners Insurance Fraud

Homeowners insurance fraud in Florida has become a huge problem, so much so that several large national insurance providers have pulled back their coverage or stopped covering homes in the state entirely. You can read more about it in our Homeowners Insurance & the Florida Crisis blog.

One thing is for sure: between Florida’s history with catastrophic storms, a plethora of fraudulent claims and repair company scams, and legislation that favors suspect litigation, insurance companies are facing problems and homeowners are bearing the brunt of the impact. This is a problem, but due to its complexity, there’s no clear solution. Past reform aimed to lower premiums, but recently the focus has shifted to stabilizing the market, something Florida lawmakers have said will take time.

State-run Citizens Property Insurance has been a long-time provider of lower-cost homeowners insurance policies, but even that could change. Lawmakers have approved a rate increase starting in 2026, something that could affect the entire industry in Florida. 

Auto Insurance Fraud

Auto insurance fraud is usually categorized into two categories: soft and hard fraud. Soft fraud takes advantage of a situation a fraudster finds themselves in. This can look like exaggerating the damages done in an accident or lying on an insurance application to get a lower premium. The cost of these “lost premiums” gets passed onto policyholders and it’s estimated that up to 14% of customers' premiums go toward paying for losses due to soft fraud. 

Hard fraud is the intentional orchestration of an accident or crime to file an insurance claim. Whether that looks like cutting someone off and slamming on your breaks to cause a crash, or lying about your car being stolen, it is illegal. Both forms of fraud are particularly prevalent in Florida.

How to Protect Yourself From Insurance Fraud 

With all of this happening within Florida, you're probably asking yourself: how can I protect myself from fraud and the effects of it? Here are a few tips we've found to help you avoid fraud: 

• Purchase your policy through a licensed insurance agent or insurance company. If you feel like you're experiencing fraud, you can rely on your trusted insurance team and agents to verify any changes to your policy. 
• If you're having work done on your home, double-check check your contractor is in good standing and licensed. You can verify this at:  www.myfloridalicense.com
• If you feel as though someone is staging an auto accident in order to file a claim for repairs, retrieve as much information from the other driver as possible and contact both law enforcement and your insurance company about the potential fraud. Before you do so, be sure you have all the details that corroborate your suspicion! 

For more tips on how to avoid fraud, visit MyFloridaCFO.com or Fraudweek.com.