Do you know that there are consequences attached when you commit insurance fraud?
Sometimes, we hear about people committing insurance fraud and wonder what led them to that.
Insurance fraud is not limited to only sellers. Insurance policyholders also commit this crime.
So, if you have an insurance policy or plan to buy one, you must know about insurance fraud.
It will guide you to know when you are about to cross the boundary of committing fraud.
Moreover, you should know when your insurance seller is committing this crime.
Without further ado, read on and understand all you need to know about insurance fraud.
What is insurance fraud?
It is an outright illegal act that involves tampering with the insurance contract.
It happens when a policyholder dubiously tries to make a false insurance claim.
Dishonest people do this to benefit from what you are not eligible for or intentionally swindle your coverage provider.
Fraudulent insurance activities have been going on for years but the involved persons do not go scot-free.
Moreover, these crimes are not only limited to policyholders. Insurance providers, employees, and agents carry out these activities too.
How does insurance fraud happen?
First and foremost, people buy insurance to benefit them at a cost.
The same goes for the policy providers. They sell insurance to do business and make a profit.
However, it is a win, win for everybody because, in the end, everybody is profiting.
Insurance becomes a fraudulent case when a policyholder magnify their claims to deceitfully enrich themselves.
For instance, a dishonest policyholder may claim severe damage to his car or home to gain access to more insurance money.
Types of insurance fraud
Insurance fraud happens in different ways and can involve any insurance policy.
According to the Federal Bureau of Investigation, if an insurance fraud happens on the policy provider level, it takes place in these forms.
Fee churning
Fee churning happens when an insurance company uses the services of reinsurers.
Reinsurers end up receiving their premium from the insurance company. Thereby, using up the money meant for the insured claims.
So, when it is time for the insurance to pay out the policyholders’ claims, funds will not be available again.
Premium diversion
Most fraudulent insurance companies come out as legit companies and earn the public’s trust.
When policyholders pay premiums to them, they divert the premiums and channel them to themselves.
When a customer files for a claim, they give excuses and end up not attending to it.
Premium diversion is mostly the highest type of insurance fraud recorded.
Workers’ compensation
Workers’ compensation fraud takes place in an office setting or an establishment.
A company that provides its workers with workers’ compensation insurance collects the funds from the insurance company.
Instead of using it on the workers, they redirect the funds elsewhere and fail to provide workers with insurance.
Asset Diversion
Asset diversion fraud happens when a company decides to purchase an insurance company with borrowed funds.
When all the purchasing documents are signed, the company diverts the assets of the acquired company, sell them off, and uses the proceeds to pay back their borrowed funds.
Insurance fraud from the policyholder level
Insurance fraud can take place on different policies.
Car insurance
Car insurance fraud can occur in the instance that a policyholder can decide to claim car theft.
They may only hide away the car or sell it off quietly so that their insurance company will pay them their claims.
Also, they may stage an accident or vandalism just to receive money from the insurance company.
Homeowner insurance
These frauds can happen in homeowner insurance where a policyholder can claim arson, property damage, or burglary.
Life insurance
Perpetrators can fake their deaths or falsify their beneficiary claims.
Health insurance
Health insurance claims can be forged. For instance, someone can claim they went to the doctor to receive treatment when in actual sense, nothing happened.
Again, padding up medical bills pass for insurance fraud.
How to detect fraud
Though, insurance crimes are still here with us, insurance companies have put strict measures in place to detect them.
Special Investigative Unit (SIU)
Insurance providers employ the services of the Special Investigative Unit.
These investigators follow up on claims and investigate the authenticity.
Whenever a fraudulent claim comes in, they swing into action to check out for foul plays and act towards it.
Insurance adjusters with a wealth of knowledge make up a part of this team, they work closely with the Federal Bureau of Investigation (FBI).
Together, they make sure to shield the company from fraudulent claims.
Behavior
Behavior always gives you out. A person that is telling a lie may convince themselves but not experts.
When you file for a claim, you will be asked questions by professionals.
These professionals are trained to see through lies and behaviors.
Showing questionable behavior triggers more investigation.
Consequences of insurance fraud
According to the law, insurance fraud is a felony that attracts a jail term of up to five years and a fine of fifty thousand dollars.
It does not matter if you committed the crime once, or you’ve been in the game for a while now.
The long arm of the law stretches out to anyone involved in this fraud, and they must all be penalized accordingly.
How to stay away from insurance fraud
Crimes put a dent in your reputation and your person. More so, the stain does not go away for a long time.
It stays on you forever and takes away any opportunity to do business with others.
In furtherance, it is wise to stay far away from insurance fraud with these tips.
First, abide within your insurance policy contract.
Do not add to your policy claims.
Be transparent in your dealing with your insurance provider.
Report a fraud from your insurance company when you notice one.
In conclusion, it takes nothing to have integrity. Fraudulent dealing can affect your innocent family in a damaging way.
