Insurance Fraud

Insurance fraud refers to any act that is committed to defraud the insurance process. This happens when a claimant attempts to obtain some advantage or benefit he or she is not entitled to, or when an insurance company denies some benefits that are due knowingly.

According to the USA Federal Bureau of Investigation, some popular schemes may include fee churning, asset diversion, premium diversion, fee churning, and workers’ compensation fraud. Perpetrators in insurance fraud can be the claimants or the insurance company.

Insurance Fraud

Even with so many ongoing preventative efforts and technological improvements, insurance fraud takes a toll on insurers, consumers, and businesses. Insurance fraud can take place during the buying, selling, using, or underwriting processes of insurance claims.

Types of Insurance Fraud

Below are the types of perpetrated acts of insurance fraud. Check out the below now:

Hard Fraud

Hard fraud is when a person makes up a loss intentionally to get money from an insurance claim. For instance, this fraud happens when a person destroys an insured property purposefully and submits a claim to get a settlement.

Destroying a vehicle, or intentional arson, falls under this category. Just so you know, hard fraud can be referred to as a felony and can result in a long time in prison or jail.

Soft Fraud

Although soft fraud involves legitimate claims, it is still considered a criminal offense. It happens more than hard fraud. It is defined as the insured inflating or fabricating a legitimate claim or lying or intentionally omitting information on an application in hopes of getting a lower premium cost.

Soft fraud can be referred to as a misdemeanor with various potential penalties. This includes up to a year in jail, fines, community service, and probation.

Signs of Insurance Fraud

Knowing the signs of insurance fraud is very important for policyholders to shield themselves against deceitful practices and scams. The NAIC (National Association of Insurance Commissioners) notes that the insured should be aware of the following signs to avoid insurance fraud:

  • Inability to provide a copy of a written policy or insurance identification card promptly
  • Brokers or insurance agents pressurize customers to purchase a policy by using hard tactics like offering a lower price for a short period.
  • 15% to 20% lower than other competitors
  • Insurance company contact information is unavailable or difficult to find.

The NAIC requires all customers to contact the state insurance department and verify if the company is legitimate before buying the policy.

Common Insurance Fraud Schemes

Insurance fraud can take various forms, targeting both insurance companies and individuals. Even if customers are not the main target, the costs of the scheme can still end up making them pay more for the policy

Non-Disclosure of Important Information, False Injuries

Insureds find various ways to defraud insurance companies. A survey shows that staged accidents, relevant information, nondisclosure of relevant information, malingering in comp claims, and multiple claims for the same incident are the top insurance fraud schemes.

Just so you know, more insurance fraud schemes in this category include identity theft to file for unemployment claims, damages done to support full roof replacement, food truck theft that didn’t exist, or self-inflicted injuries on yourselves. It is advisable to know the trends in insurance fraud.

Health care Fraud

In the United States, healthcare fraud is considered the most financially burdensome type of insurance scam. This practice does not only compromise the integrity of the integrity of the health care system but also imposes financial strains on insurance providers, consumers, and health care providers.

A healthcare scam usually happens when individuals or medical professionals acting as medical practitioners purposely give false details to a health insurance company. It can be found in several areas, such as home health services, clinics and doctors’ offices, hospitals, pharmacies, pharmaceuticals, medical devices, long-term facilities, and durable medical supplies.

Life Insurance Fraud

Life insurance fraud can make your policies very expensive and even weaken the financial health of an insurer. It occurs when the insurance company or insurer provides false or altered information with the goal of financial gain. This fraud can include forgery, lying on applications, faking a death, selling fake policies, agents not paying premiums to the insurer, and murder.

Property and casualty fraud

Property and casualty insurance fraud happens when a person makes false claims related to personal injuries or property damage to get money from the insurer. It can happen in many ways, such as when auto professionals ask drivers to go through unnecessary repairs. It also includes contractors not following the contracts and arson.

Auto-Theft Fraud

An auto theft scam happens when the car owner reports falsely that their car was stolen. Or when a person not present in the car at the time of the accident submits a claim to get funds from the insurer. This practice affects the insurer and can result in nationwide rate increases for car insurance in general.

Workers Compensation Fraud

When an employer pretends that the employees are independent contractors to avoid paying insurance, this is called workers’ compensation insurance fraud. This practice cheats insurers, enables dishonest bosses, and avoids taxes.

Auto Premium Fraud

Also referred to as premium leakage, auto premium fraud involves the insured providing false information to get lower premiums. This fraud happens throughout the policy process and causes issues for the insurance company due to potential long-term financial losses and a competitive market. Misrepresentation includes vehicle use, garaging location, number of drivers, or misrepresenting the mileage on the car.

Disability Insurance fraud

People who attempt disability insurance fraud provide false information. But at times, claimants may not know they are committing fraud. And the reason is that they don’t know the rules or didn’t describe their condition accurately. Disability fraud is when a customer knowingly deceives the insurer with information to collect disability benefits.

Disaster-related fraud

When a natural disaster occurs, some people may try to help survivors by acting as legitimate disaster aid workers. And offer to assist survivors with their application. This scheme includes exaggerated or false claims, contractors inflating repair costs, and claims filed by people who lived outside the coverage location.

How to Avoid Insurance Frauds

Insurance fraud is now a very popular issue that affects businesses, insurance companies, and individuals. Fraud increases premiums, takes, and even raises consumer prices. To avoid being a victim of insurance fraud, you first need to verify the potential insurer. Ensure that you verify that the insurer you chose is licensed in your state. You can go to A.M. It’s best to check out insurance company ratings.

Secondly, ensure that you complete your application carefully. Avoid leaving your application sections empty. Do not provide incorrect or incomplete information on your application. Always remember that providing false information on your application or claim is totally against the law. Do not allow any agent to pressure you into providing the wrong information or missing important details.

Thirdly, review your policy details well. Ensure that you read your policy well once you receive it. And check if it includes the coverage you discussed with the agent. Call your agent instantly if it does not match. Lastly, ensure that you keep copies of your insurance records. Ensure that you store them in a secure location, such as a waterproof container or safe deposit box, with a trusted person, such as your attorney or friend.