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Insurance Fraud
Insurance fraud is an enormous problem in the United States, one that costs millions of dollars each and every year. Unfortunately, many people do not realize the severity of this crime. There exists a mistaken perception that this type of fraud is somehow harmless and acceptable. In reality, though, all are the victims of this illegal activity, paying in the form of higher insurance premiums, hundreds of dollars more than they would otherwise be.
Property/casualty insurance fraud cost insurers about $29 billion in 2003. Fraud may be committed at different points in the insurance transaction by different parties: applicants for insurance, policyholders, third-party claimants and professionals who provide services to claimants. Common frauds include "padding" or inflating actual claims; misrepresenting facts on an insurance application; submitting claims for injuries or damage that never occurred; and "staging" accidents. Prompted by the incidence of insurance fraud, 43 states have set up fraud bureaus. These agencies are reporting a record number of new investigations and many cases brought to prosecution.
Auto Insurance Fraud
At the end of 2004, the Coalition Against Insurance Fraud said that auto insurance fraud amounts to $14 billion in false claims a year. A study by the Insurance Research Council in 1996 found that one-third of all bodily injury claims for auto accidents contained some amount of fraud. Most of the 33 out of 100 bodily injury claims identified as fraudulent included 'padding' or 'build-up' exaggeration of injuries based on actual accidents.
Health Insurance Fraud
The nation's bill for health care fraud is enormous, as large as $95 billion, according to some estimates. Fraud and abuse take place at many points in the health care system. Doctors, hospitals, nursing homes, diagnostic facilities and attorneys have been cited in scams to defraud the system.
What is insurance fraud?
Insurance fraud is an attempt to obtain money from insurance companies by arranging a loss or accident or falsifying information on applications for insurance claims. Fraud can range from large, organized operations involving hundreds of thousands of dollars to an otherwise honest individual who overstates a legitimate claim.
Soft insurance fraud, also known as opportunistic fraud, occurs when normally honest people pad legitimate claims or intentionally understate the number of miles they drive each year or, in the case of business owners, list fewer employees or misrepresent the work they do to get a lower premium.
The dictionary defines fraud as the intentional perversion of truth to induce another to part with something of value or to surrender a legal right. Insurance fraud can be “hard” or “soft.” Hard fraud occurs when someone deliberately fabricates claims or fakes an accident. Criminals are using increasingly sophisticated electronic schemes to defraud insurance companies.
What is the penalty for being found guilty of insurance fraud?
In most of its forms, insurance fraud is a felony. When caught, prosecuted and found guilty, most fraud perpetrators are required to make restitution and jail time is also commonly imposed.
What is the most common types of fraud cases?
Insurance fraud can be divided into three categories: false claims for injuries; arson for profit; and false or intentional auto theft and physical damage.
What is the insurance industry doing to reduce fraud?
The insurance industry is committed to reducing fraud by teaching claims professionals how to recognize suspicious claims and work with law enforcement and fir services. Insurance companies have units trained to investigate fraud.
What can citizens do to reduce fraud?
People who want to fight back against this crime can call their state department of insurance and report the crime.
What effect does fraud have on the average insurance policy holder?
The insurance industry estimates the size of insurance fraud to be about 10-15 percent of the premium dollar and will rise further as it increases.
Who Commits Insurance Fraud?
Insurance fraud perpetrators can be members of complex, organized fraud rings or the next-door neighbor looking for a second income.
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