According to the National Insurance Crime Bureau, insurance fraud has risen 27% nationwide over the past three years. The main reason for this rise is believed to be because of the economic downturn and distress the economy is experiencing as a whole.
Insurance Fraud Defined
Insurance Fraud occurs when individuals deceive an insurance company, agent or other persons to try to obtain money to which they are not entitled. It happens when someone puts false information on an insurance application, and when false or misleading information is omitted in an insurance transaction or claim.
Reasons it is on the Rise
The main reason for the rise in insurance fraud is due to the economic distress in the economy, but another disturbing reason is due to the social acceptance of fraud. More individuals are beginning to tolerate this illegal activity because they view insurance companies as “faceless” corporations and do not have a problem committing fraud or others committing fraud against them.
This illegal tolerance is hard on insurers. They have been experiencing an inability to consistently detect insurance fraud cases. By the very nature of the crime, it is intended to usually be subtle and well hidden by those committing the fraud. Insurance companies are vigilantly investigating the cases that come to their attention, but at the end of the day, the best any insurance watch group can do is to estimate the total lost every year to insurance fraud.
Most Common Types
There are many types of insurance fraud that are committed each year, but the most common type, by far, is through automotive insurance. Often times credit crunches and increase in gas prices lead drivers to seek money through bailout from insurance money. Automotive insurance isn’t the only type of insurance fraud committed. The following are additional types that appeal to scammers.
- Workers Compensation
The only insurance fraud that has actually declined in the past year involved personal property/fire insurance policies.
Affects of Insurance Fraud
Insurance Fraud does not only hurt those directly involved and the insurance companies themselves, but everyone that is buying insurance. Every time fraud occurs, the cost of premiums rises. The recent costs per year have risen to $80 billion each year, which amounts to approximately $950 per household.
To help prevent insurance fraud from growing, become aware of the following things and report it immediately.
- Staged accidents, such as intentional sideswiping or cars that cut in front of other vehicles, forcing collisions due to quick stops.
- Individuals that try to get you to leave the scene of an accident without calling police or obtaining a police report.
- Individuals that continue unnecessary medical treatment which inflates medical benefits.
- Be aware of individuals reporting fake burglary or theft claims.
- Individuals that report damage as vandalism in an attempt to cover deliberate or previous damage to one’s own property.
- Individuals that fake an on-the-job injury or stay off work after healing to collect Workers’ Compensation benefits.
- Individuals may change a genuine claim to inflate the loss to recover past premiums.
- Individuals that inflate genuine claims to cover a policy deductible