Insurance fraud accounts for substantial claim losses across the industry, according to a new survey examining fraud in Australia and New Zealand.

The biennial report by KPMG shows the general insurance industry in the two countries loses more than $142.4 million a year in fraud while the finance sector loses $55.3 million.

It also showed the cost of fraud per organisation across a range of industries has doubled from $1.5 million per company in 2008 to $3 million this year.

KPMG Forensic Partner Garry Gill told insuranceNEWS.com.au such an increase makes it a factor in premium rate rises.

Insurance and finance companies accounted for the majority of organisations that lost $1 million or more to fraud – nine out of 11.

Mr Gill says although the incidence of fraud has almost doubled, most respondents to the survey believe only a third of fraudulent activity is being detected.

“This is particularly concerning as the results capture a relatively small portion of the business population,” he said.

“The real fraud price tag for Australia is substantially more, likely in the billions of dollars.”

According to the report total fraud costs have jumped from $301 million to $345 million.

Mr Gill says bogus insurance claims remain the leading cause for fraud in the industry.

Although the financial services sector is most likely to be hit by external sources, the survey shows company employees or directors are the main offenders for all other sectors.

“These results should be a wake-up call for every Australian business,” Mr Gill said. “Fraud is definitely on the rise, with much of it – particularly ‘insider’ fraud – preventable.

“It is incredibly costly, and sometimes a sometimes deadly business. Once your money has gone it’s extremely hard to recover, so prevention and early detection is the key to managing the risk of fraud.”

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