The title, "Heads I Win, Tails You Lose" is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser. If the fraud succeeds the insurer must charge more premium to cover the expense of defending the fraud and payment of funds to the fraud perpetrator. If the fraud fails the insurer must charge more premium to cover the expense of defending the fraud. Everyone, except the lawyers, lose.

The legislatures of the various states, the United States Congress, the National Association of Insurance Commissioners, The National Insurance Crime Bureau and insurance industry groups have finally decided that the war against insurance fraud is worth fighting. Until the states, the local police agencies, the district attorneys, the United States Attorneys, and the Attorneys General of the various states join in the battle it will be fought to a stalemate. The insurance industry cannot successfully fight insurance fraud alone.

On the state level the effort has begun. California, and many other states, have forced the insurance industry to pay money into a special fund to create a Fraud Division, California Department of Insurance or Fraud Bureau whose only duty is to investigate and prosecute insurance fraud perpetrators. Proposition 103 and Special Fraud Investigation Unit Regulations forced insurers to pay monies into another fund to pay prosecutors to prosecute the crime of insurance fraud and to create their own special fraud investigation units. Defrauding an insurance company is a felony in most states.

All of these actions suggest that the Legislatures have concluded that insurance fraud is draining away the wealth of their states into the pockets of criminals yet they wish to pass the buck to insurers to do the investigations. California, by statute, state that it is the public policy of the state that insurance fraud must be stopped.

Insurance industry sources estimate insurance fraud from lows of $80,000,000,000 ($80 billion) a year to highs of $200,000,000,000 ($200 billion) a year. Regardless of which, if any, estimate is accurate the amount of money going to insurance criminals is staggering and approaches no less than 3% to 10% of premium collected.

What has been the result of these new statutes? Are insurance criminals going to jail? Have there been scores of arrests? Have the courts been inundated with prosecutions? No. The prosecution of an insurance fraud is as rare as snowfall on the on the Island of Oahu.. It happens, but not in the numbers that the extent of the crime would suggest. Convictions are even more rare. Prosecutors complain that insurance companies do nothing. The statutes compelling insurers to form fraud investigation units usually have no penalties if the insurer fails to establish such a unit [California imposed regulations that imposes a $5,000 fine for failure to establish a Special Investigation Unit or to train its integral anti-fraud personnel and other states are following that lead.]

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