Those who are wondering: “what is insurance fraud”, it ranges from small exaggerations on the policy form to large manipulated claims to money by dishonest people. Essentially, there are two types of fraud. Hard fraud is when someone deliberatly takes measures to trick an insurance company.
They fake injuries, thefts, arson or lives to gain money that the insurance company is bound to pay if these claims were real.Soft fraud in insurance is much more common. This consists of small lies, innocent exaggerations in filling out forms that reach for a low payment on the policy but a higher gain in eventual payment. People lie about their property, medical history, cars and other details.
1. Costs of fraud
The costs of fraud are not generally taken into notice when someone goes out of their way to trick someone else. They might have gained money, but the loss to the company can be immense. People end up losing jobs, getting fired over these things and it impacts society in general because insurance is a government run program. To pay for the losses, the government raises the prices of other things for everyday use.
2. Types of Insurance Frauds
Types of insurance fraud are diverse in nature and varying in their forms. They range from car insurance to worker’s compensating policies and property insurance.
Post date life insurance is an easy form of fraud. This means that an insurance policy has been drafted after the death of the person it is made for. Of course this cannot be done without the help of an insurance agent.
False medical history is another way for people to trick insurance companies into giving them money. They omit details in the policy drafts that they think do not matter. For example they do not write about smoking habits or previous medical conditions in an effort to get the company to pay more.
In some extreme cases, desperate people resort to murder to gain life insurance policies. They stage accidents or downright kill their children, spouses or family members for a chance to get money from insurance companies.
There are many ways to conduct auto insurance fraud. The most common is to have the car burnt or destroyed. This way, they can claim that is was in an accident and never have to reveal the details of the incident. The second is slightly cleverer. In the guise of a theft, owners sell their car for parts. Once the car is gone, they claim that it was stolen. The company cannot find the car so naturally it has to pay the owner the insurance money.
Another way to lay a false claim about the car vanishing is to stage a small collision. People see no harm in it and if they get hurt in the incident they see it as a small sacrifice for a bigger cause. Insurance fraud is as common as insurance itself. So the companies now hire professional investigators to catch the ones who do this.