Did You Know?Fraud causes insurance companies to lose approximately $30 billion every year!
The insurance business is affected by fraud that costs millions of dollars every year. It's a crime that not only affects insurance companies, but also translates to higher costs of premiums for the common man, as insurance companies increase the cost of premium to make up for the losses incurred as a result of fraud.
Frauds are prevalent in every sector of the industry. Hence, it is our responsibility to report anything that we find suspicious, as our doing so can successfully foil the plan of someone attempting to dupe the company.
In this Buzzle article, we shall take a look at some of the most common types of fraud that insurance companies have to be aware of.
Automobile insurance fraud is perhaps the most common. The fact that auto insurance is compulsory these days has led to a rise in the probability of auto insurance fraud. Some of the most common types of automobile fraud include those listed below.
Report of False Theft
This is a common type of fraud in the automobile insurance sector. The culprits report that a car is stolen, when in reality, it is not. So, what do they do with the car? Well, they either dismantle the car at an automobile repair shop, or sell the car overseas after removing the license plate. This way, it becomes impossible for the authorities to trace the existence of the car, and the culprits get the money.
Report of False Accident
It is interesting to note that not all accidents are genuine, and some of them are deliberately executed for the sake of insurance money. The driver of both the colliding vehicles are usually the only people involved in the scam, but depending on the amount of the claim involved, there can be more people involved, like eyewitnesses, etc.
Report of False Injury
This is a fraud that takes place after a car accident, genuine or staged. Since auto insurance also covers the cost of treatment for the injured, random people go to the insurance company, claiming that the collision or accident has left them badly injured.
Report of False Damage
This is similar to false injury fraud. After an accident, which might be real or staged, the culprits report to the insurance company with a pre-damaged vehicle, stating a higher value for repairs to the vehicle, and duping the insurance company in the process.
Property insurance fraud is committed by causing intentional damage to property, which includes residential and commercial property. Here are a few common instances of fraudulent claims for property insurance.
Report of Increased Damage to Property
If there is damage to property caused by fire or natural calamities, some people take this opportunity to exaggerate the extent of damage caused, and sometimes even resort to causing more damage, just to be eligible for a greater sum of money.
Report of False Theft or Burglary
This is another common instance of insurance fraud, where the perpetrators report an instance of theft or burglary in their residential or commercial property, and claim for the losses incurred. The valuables are deported to a different location, and the values of the same are exaggerated.
Arson is the intentional setting of fire to property. The motives behind it can be many, and it is quite common for both, residential as well as commercial property. For example, if the owner of a residential property finds it difficult to find a buyer for his property, he may set it on fire to pocket the insurance money. Similarly, if a commercial property is incurring losses, the owner might resort to arson to recover the initial investment.
Claim for Intentional Damage
This is a type of fraud that is similar to arson. In this case, the perpetrator causes intentional damage to the property and files a claim to the insurance company for the same. The motives are mostly the same as that for arson.
The healthcare sector is one sector where fraudulent claims are quite common. In fact, it is not only the patients who are involved, but also the doctors. Here are a few common examples of such insurance fraud.
This type of fraud involves billing the insurance company for services not provided to the patient, and the perpetrators in this case are the healthcare providers. If a patient has medical insurance, the hospital charges him diagnostic tests and/or surgical procedures that were never performed, and this is reflected in his bill.
Billing for Unnecessary Services
This is slightly different from the false billing claim, because in this case, the patient is not overcharged, but is made to undergo unnecessary diagnostic procedures, just for the sake of a higher insurance amount. The hospital claims that the said services were crucial to the treatment of the patient.
This is another common type of insurance fraud in the healthcare sector. It means that the healthcare provider charges twice the amount for every service, leading to a net increase in the billing amount. To fight this fraud, patients should request for an itemized bill from the hospital.
The life insurance sector is one where the majority of frauds are witnessed. Here are a few of the most common ones.
Weird as this may sound, faked deaths are a fairly common type of insurance fraud. The perpetrator fakes his death, and his family gets the insurance money. After that, either the entire family moves out of town or the perpetrator returns after a few years, claiming to have lost his memory.
This is a type of fraud that is not committed by the insurance holder, but the agents employed by the insurance company for collecting the premiums. The fraud agents collect the money from the insured, but never deposit the money. The result is that, the insured is at a loss, as he/she either does not get covered, or defaults on payments.
This is another type of fraud committed by insurance agents. In order to convince a prospective customer, they do not explain the policy in detail, and make tall claims instead. When the insured discovers the truth, it's simply too late.
This fraud is pretty common, and it means that a single person holds more than one policy, without the insurance company being aware of it. The motive is to earn huge profits by collecting insurance money from different insurers.
So, you see that there is no dearth of ideas that people come up with when it comes to tricking insurance companies into paying more money. As for you, always be alert and think twice before you purchase an insurance policy.