Insurance fraud on the rise, with honest South Carolinians paying the price

COLUMBIA, S.C. (WCSC) – Insurance fraud is a crime on the rise in South Carolina, ranging from people who lie about where they live to get lower rates to some even staging car crashes.

It costs South Carolinians every year through inflated premiums, with a 2022 report detailing adults in the state pay more than $1,000 annually on average because of this fraud.

As a legislative panel studying this crime heard this week at the State House, many of these complaints are never investigated.

“This is a crime against every South Carolinian that is paying some form of insurance,” Rep. Russell Ott, D – Calhoun and a member of the House Ad Hoc Committee to Study Insurance Fraud, said.

The director of the state’s Insurance Fraud Division, Joshua Underwood, said automobile fraud is driving about half of all complaints in South Carolina.

That can include people lying about where they live or how many people are in their household to get lower rates, reporting the same damage on multiple claims, or even staging crashes.

“We do have a lot of fraud occurring based on our population, a disproportionate amount of fraud in South Carolina,” Underwood said.

The Department of Insurance reports counties with larger populations tend to have more fraud complaints, but some smaller counties, like Sumter, are also experiencing higher rates.

A record number of insurance fraud complaints were reported in South Carolina last year, 3,182, and the state has nearly reached that number this year with two-plus months left.

“I think that we’re doing the best job that we can with the resources we have, but as I’ll discuss a little further on, I think more resources are eventually going to be needed to be put in place at various agencies to attack that problem,” Underwood told lawmakers.

One of those resources could be more manpower.

The South Carolina Law Enforcement Division (SLED) currently has five agents to investigate insurance fraud claims, which it said pales in comparison to North Carolina and Georgia, which each have 50.

“We certainly could be working more cases now if we had more agents to work them,” SLED Chief Mark Keel said.

Keel said his agents try to focus their limited resources on what he describes as more flagrant complaints.

“We’re trying to focus on those cases that involve a [crime] ring, somebody who’s been involved in multiple fraudulent claims that have been made,” he said.

In South Carolina, the Department of Insurance first vets complaints, which insurance carriers typically report. Then the department sends some of them along to SLED’s agents to investigate.

Out of the 3,182 complaints reported last year, the Department of Insurance declined to forward 1,653 of them to SLED.

That still leaves many complaints not investigated or prosecuted but still paid out, as Underwood detailed how insurance carriers are under pressure to pay claims out quickly, even if they could be fraudulent, or risk losing customers.

Honest South Carolinians are left footing the bill.

“We have to be pretty picky and choosy when it comes to which cases are we going to send to SLED, which ones are worthy of getting the most bang for our buck, so to speak, for investigations, so that’s a reason why there’s such a large number of those declines,” Underwood said.

A nationwide study found more than 53 million Americans do not consider insurance fraud to be a crime, with younger Americans much more likely to have this view.

The Department of Insurance said that this rising crime could keep growing.

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