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Ethics and insurance fraud

Ethics and insurance fraud



It is always disturbing to see witnesses of fraud. Who does not want to believe that we are better than this? This is particularly discouraging at a time when systems that support our local and national communities are already under severe tension.

Insurance fraud is all too often seen as a crime without victims. Insurance companies are represented as faceless entities. It is accepted that these colossal organizations consisting of nameless people can easily afford to have their pockets plucked. Although most people know better, it is not widely understood.

According to the FBI, the total cost of insurance fraud (non-health insurance) is estimated at more than $ 40 billion per year. Simple distribution then suggests that the average American family pays between $ 400 and $ 700 per year in the form of increased premiums due to insurance fraud.


Although some of the public’s cynicism has been earned, some are fueled by individuals and entities abusing social media platforms.


These actions and their consequences increase the need for clarity regarding ethical behavior.

Theft, such as looting, is wrong regardless of the size or wealth of the victim. Strong and purposeful clarity in this regard will help discourage insurance fraud, along with other cases of fraud that undermine the public good. There is no middle ground in this matter. There is only right and wrong.


It’s no secret that we live in a cynical time. Aircraft manufacturers, social media platforms, financial institutions, newspapers and elected officials, to name but a few, are often viewed with skepticism. Of course, our own insurance industry is sometimes not trusted by the public. This mistrust is currently on display because hundreds of insured persons have filed lawsuits against transport companies because interruption insurance does not cover claims related to COVID-19.

Although some of the public’s cynicism has been earned, some are fueled by individuals and entities abusing social media platforms. Not every person or organization drenched in a tweet storm deserves to get wet.

Although ethical behavior includes a moral component, it is a practical advantage.

As risk management professionals, we realize that ethical behavior will usually lead to safe behavior. If I had the time and your patience, I can name hundreds of examples. Since time and patience are extremely scarce resources during these challenging times, here are some examples:

  • If you drive a motor vehicle with proper maintenance while following the rules of the road, it will cause more than a safe and inconvenient journey.
  • Providing employees with a properly designed work environment and personal protective equipment (PPE) reduces the number of injuries and deaths in the workplace.
  • Businesses that take the time and spend the necessary money to properly select, train and equip customer-oriented employees are targeted by fewer customer things.
  • Testing new products will also result in fewer lawsuits.

In each of these cases, ethical behavior contributes to safe outcomes.

I believe that many people choose to act in an ethical manner while all else being equal. The reason why some prefer to deviate from this path is when they feel that it is more likely to lead to short-term success, otherwise known as immediate gratification. This disorder is also sometimes called a ‘shortcut’ or ‘the path of least resistance’.

Business turnaround, happiness and financial setbacks can also aggravate a person’s ethics.

Of course, long-term failure and, at best, only short-term success, are the more likely outcomes if ethics is abandoned or bent. Unethical behavior often leads to lawsuits, reputational damage, weakening of customers, weakening of employees, weakening of key suppliers, failure of cases and even time in a prison sentence.


I feel compelled to add that ethical behavior does not guarantee success, although it would certainly be nice if that were the case. A poor service model or a poorly designed product range will nevertheless fail, ethical choices.

However, you will still be able to look at yourself in the mirror.

About Kevin McPoyle

McPoyle is president and co-founder of KMRD Partners Inc., a risk management consulting firm and P / C insurance broker in Warrington, Limerick, and West Chester, Penn.

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