Fraud occurs when a person intentionally lies to obtain a benefit or advantage for the things or information they are not otherwise entitled, or someone knowingly rejects a benefit that is due and to which someone is entitled. According to the law, an Insurance Scam can be committed when-
The suspect had the intent to defraud. Insurance scam has existed since the beginning of insurance as a commercial enterprise. Hackers claims account for a specific portion of all claims that are received by the insurer and costs billions of dollars yearly. Insurance scam also ranges in severity, from slightly exaggerating claims to deliberately causing accidents or damage. Insurance fraud poses a significant problem, and the government and other organizations try to deter such activity.
The most Common Type of Insurance Scam
Car Insurance Fraud
This is one of the most common frauds of all time. The happens when someone reports an accident and damage to the insured car stating that the insurer has paid to have it fixed, but the person never repairs the car with the money that they claim from the company.
Secondly, there is the ‘stolen car’ Fraud, where the owner reports a car theft to complain but sell its parts to a body shop who will disassemble the car and sell its parts. And later on, the car owner will claim a hefty amount from the insurance company earning twice for the same commodity.
Health Insurance Fraud
This is another common way of ripping off the insurance companies. Several times, health insurance fraud will involve a medical practitioner themselves. Generally, the doctor will either bill your health insurance company an excessive amount of money for otherwise routine checkups or procedures that never happened.
Other times, the doctors will have you undergo completely unnecessary medical procedures to bill your insurance provider.
Staged Home Fires or Storm Frauds
Another common way people commit a crime to earn a little extra. Sometimes, homeowners pay off people to commit an act of vandalism on their property. They then attempt to recoup the value of their home and valuable possession with the false insurance claim. This kind of staged home fires usually end up high-risk accidents and causes more financial loss a person can ever imagine.
Other times, opportunist criminals will submit fraudulent claims after a home has incurred damage from storm or flood. Usually, the homeowner will do the damage sustained from the storm much worse than it was to receive more payouts. Sometimes there is no storm damage, to begin with.
Classification of an Insurance Scam
Insurance Fraud are Classified into Two Categories Hard Fraud or Soft Fraud-
Hard Fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto theft, or fire that is covered by their insurance policy, so they claim payments for the damage.
Soft Fraud, this kind of Fraud consists of policyholders exaggerating otherwise-legitimate claims. It can also happen while obtaining a new health insurance policy, an individual by mistakenly misreports previous or existing condition to obtain a lower premium on the insurance policy.
How to Report an Insurance Scam?
If a person is suspecting a scam, but how to report the scam is the main question. The person desiring to make a fraud should gather all of the information available, including the suspect’s name, the names of any organizations or insurance companies involved, and the dates of the suspected Fraud. Insurance fraud can be reported by contacting one or more of the following entities-
• The states fraud bureau
• The insurance company committing Fraud
• Medicaid and Medicare if they were the agency involved.
• State Medical Board
5 Ways to Protect Yourself from an Insurance Scam
If a stranger contacts you about getting new health insurance and asks you to pay – or asks for your personal financial or health information – it could be a scam. Always verify the company you applied for and call them back from an official number listed on their website.
If a stranger contacts you and claims to be from the government or Medicare asking you to pay for a new insurance card, it is a scam. Never share any personal data with them and contact your local police authority.
Always keep your insurance card safe and secured. Treat it like a personal identification card and never lend it to others. If your information is ever lost or stolen, immediately report it to the police or your health insurance company. Safeguard yourself from hackers online, use privacy protection software to protect your personal details online. Read our blog “10 Ways to Protect Your Privacy on the Internet” to learn to protect your Digital Identity Online.
Fake Insurance Websites
Be aware of these fake insurance websites claiming to sell insurance. You should never buy insurance without confirming first that the website or company is legitimate. If in doubt, stop and verify the facts with a trusted source.
Impact of Insurance Scam on the Economy
The economic impact of insurance fraud is significant, as it costs Americans an average of $80 a year. Auto insurance fraud is one of the costliest and most dangerous forms because many people have been injured and have lost their life in such scams.
Safety is Better Than Cure
If you are unsure about an insurance agent or company, do not sign the contract. Take time to find out more about the firm and write a check only when you are sure of their credibility. Confirm that the insurer is licensed and legitimate.
Business owners need to be diligent in making sure that their premises do not provide the opportunity for someone to make a claim. Keeping up on removing barriers on the floor, cleaning and maintaining premises video are all key things to avoiding Fraud. Destroying the unused data also plays an essential role in helping the company as well as the employee. If you think that you are a victim of insurance fraud, or are aware of an incidence of Fraud, you need to file a complaint against the individual or company who committed the crime.