Insurance fraud refers to the act of committing a deliberate scam using insurance policies. This usually occurs when a person files for a claim or benefit that he or she is not entitled to or when the insurer denies the claim that the policy holder is eligible to. False claims are submitted with the intention of deceiving the insurer. Insurance fraud has been in business from the time insurance companies first started. The percentage of false claims amount to a substantial share in the total claims from the policy holders. Insurance companies lose billions of dollars yearly.
There are different kinds of scams that affect all areas of insurance. The level of deception vary from low risk overstated claims to initiating deliberate accidents. Such crimes also affect policy holders with an increase in the charges of insurance premiums. The contract and terms of agreement serves as the basis for loopholes where both the insurer and insured can abuse its conditions. There are instances where the insured files claims that have never actually happened. These scams continue to be a problem for insurance agencies, government, private companies and individuals.
Soft vs. Hard Insurance Fraud
There are two kinds of insurance fraud, soft and hard. A soft fraud is the most common type of scam. Policy holders exaggerate their claims so they can receive the benefits. They usually file more damages than the existing situation or provide false reports to get more benefits. A hard fraud pertains to an individual who purposely schemes to create a loss such as accidents and damages that is covered by the insurance policy, with the intention of claiming the payment in exchange. Some companies pay scams amounting to millions of dollars.
How do you know if it’s a scam? First you need to be aware if you have certain doubts or suspicions regarding a policy. You can check with other insurance companies or seek advice from other governing bodies to examine your suspicion. You can elevate this to an investigator for assessment. In the case of the insurer, they resort to data and statistical studies to check suspicious claims and then pass it for further investigation if necessary.
When it comes to fraudulent claims, they can either be legitimate with exaggeration or false claims that never happened. Once insurers detect an exaggerated claim, the insurance company discusses the details with the insured to revert to the right benefits. In some cases, the agent transfers the policy to special investigation departments for more in depth assessment. Many countries acknowledge insurance fraud as a serious crime and have certain laws to address and penalize these perpetrators.
Nowadays, with the rampant crimes happening all around us, most scammers are becoming more creative when executing their game plan. Sometimes, they come up with the most bizarre stories just to gain your trust and at the same time, put a knife at your back once you do. These scammers do not care what it will do to you as long as they get what they need from you. They want your money and loads of it too. What you can do to protect yourself is to study and understand your policy from top to bottom. This way, you will not be easily fooled by anyone.