According to this article, a reduction in claims means economic recovery

Here is a copy of an article I recently read. In summary, Tim Barry of Specialty Risk Services feels that a reduction in claims is an indicator of economic recovery. I can see where he's coming from on this. We are taught in the insurance world that fraudulent claims increase during tough economic times. So, logic would dictate that a decrease in fraudulant claims indicates an upward trend in the economy due to less economic strain on businesses.

I don't fully agree for three reasons. One, the insurance industry has tightened its underwriting process and has been more pro-active in regards to loss control. Both reduce the likelyhood of fraudulant claims. Second, Workers Compensation claims are a major contributor towards fraudulant claims. With less workers in the work force, claims are naturally reduced. The final reason is that those that are likely to file fraudulant claims may have been exhausted from the system. File too many claims (especially one's that are suspected of fraud) and you will get cancelled and possibly become uninsurable.

None-the-Less, here is the article...

The recession ended Oct. 1, claims fraud data shows
16 days ago Tags: Workers Compensation Claims Services
The National Bureau of Economic Research hasn't announced an official end to the current recession. But the slump might have sputtered out on October 1, according to a claims investigator.


Tim Barry is assistant VP and special investigations director for Specialty Risk Services LLC, a Hartford, Conn.-based third party administrator.

His data shows an upward trend in fraud referrals from adjusters peaked on October 1, and then dropped slightly and pretty much leveled off when adjusted for claims volume.

Mr. Barry spoke on combatting fraud at the Risk and Insurance Management Society's annual conference last week in Boston.

In the process he explained the inverse relationship between the economy and fraudulent claims. As the economy plummets fraud increases and then decreases in better times.

Based on that Mr. Barry told a conference session, somewhat tongue in cheek, that the recession ended last fall.

Workers who remain unemployed would disagree that the recession is over.

But we slid into the recession long before most people realized it was underway and the same is likely to occur as we move out of it.

The National Bureau of Economic Research announces dates for business cycle peaks and troughs. It describes a recession as a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

The NBER usually doesn't peg a date for the beginning or end of a slump until more than a year after those occurrences.

For example, it announced a December 2007, peak in economic activity on Dec. 1, 2008. The November 2001, recession trough was announced on July 17, 2003.

According to a BusinessWeek story I read on my way home from RIMS' conference the NBER currently believes it is premature to declare the recession's end as unemployment and other problems persist along with signs of improvement.

But it will be fun to eventually see whether the NBER, when it finally announces the date for the recession's end, agrees with Mr. Barry's data.