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Insurance fraud doesn’t just affect insurance companies. With fraud draining five to ten percent of annual revenue in the insurance industry, that lost profit trickles down to you, the consumer, in the form of higher bills and premiums. 

To put the impact of fraud in the insurance industry in perspective, consider the following:

  • Estimates for the annualized cost of fraud in the property and casualty insurance industry range from 0% to more than 25%.
  • Over the past five quarters, average earnings before interest, taxes, depreciation, and amortization for the property and casualty insurance industry ranged between 11.85% and 18.95% of top-line revenue.
  • Over the past five quarters, the price to earnings (P/E) ratio for the property and casualty insurance industry ranged between 5.70 and 29.59.
  • Under the status quo, every $1 in fraud reduction that falls to the bottom line translates to between $10.80 and $24 in market valuation, with a median P/E multiple of about 17.7.

Fortunately, leading organizations are using new, cutting-edge counter-fraud solutions, including predictive analytics and cognitive computing, to plug the revenue drain and keep insurance rates lower for consumers. Check out this revealing blog by VP Research Fellow Derek Brink to learn more.

 

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