Insurance fraud occurs when unscrupulous individuals commit an act with the intent of fraudulently obtaining entitlements that they originally would have not been authorized to collect. Insurance fraud also occurs when someone knowingly denies benefits to somebody who originally possessed rights to those entitlements. False insurance claims, a common form of insurance fraud, occur when a party files an insurance claim with the intent of defrauding an insurance provider. Insurance fraud has existed ever since its inception as a commercial industry. Fraudulent claims account for billions of dollars lost annually, which results in higher premiums for the rest of insurance holders. The types of insurance fraud vary across several industries, including automobile, medical, life, workman’s compensation, fire, property, unemployment and healthcare. Insurance claims also range in severity, such as exaggerated claims to homicide. Insurance fraud poses significant problems for providers, governments, and other organizations that are making attempts to curtail these activities.
Automobile Insurance Fraud
Automobile insurance providers, local governments, and law enforcement entities have collaborated to thwart fraud rings from faking traffic deaths or collisions in order to collect insurance money. Many of these perpetrators will make exaggerated claims to collect funds covered by insurance providers. These fraud rings may involve insurance claims adjusters and others who counterfeit police reports and then process them. The Insurance Fraud Bureau located in the United Kingdom (UK) has reported over twenty thousand staged collisions from 1999 to 2006. Automobile fraudsters tend to drive into the middle of busy intersections or roundabouts with the intention of slamming on their brakes. This causes drivers behind them to rear them from behind, ultimately placing the fault on the other drive for driving too close or too fast behind them. In addition, these perpetrators may make exaggerated claims of whiplash and other physical damages caused by the accident.
- HowStuffWorks: 10 Ways Insurance Agents Spot Fraudulent Claims
- Auto Insurance Fraud Penalties and Consequences
- California Auto Insurance Fraud Laws
Medical Insurance Fraud
Medical insurance fraud costs providers billions of dollars annually. Perpetrators usually commit one of three common forms of medical insurance fraud, including false personal injury claims, excessive treatments, and false claim filing. Many perpetrators attempt to fake an injury in order to receive benefits, usually at the expense of the healthcare provider. Excessive or false claim filing occurs when a healthcare provider attempts to collect funds from the insurance provider for a service that was never performed. For instance, the healthcare provider may attempt to bill the insurance company for equipment and supplies that were not used during a procedure or examination. This results in higher fees for the patient. Personal injury claims occur when lawyers attempt to benefit from exaggerated injury claims from a victim. In many cases, the victim exaggerates his or her injuries in order to receive funds.
Life Insurance Fraud
Life insurance fraud occurs when an individual fakes his or her death to claim benefits. Life insurance fraud may involve highly elaborate schemes. Perpetrators may contact the insurance company years after the incident, claiming amnesia to previous events. Other perpetrators have actually hired hit-men to stage a homicide of their spouses to collect life insurance funds. In addition, unscrupulous companies have insured their employees without their consent in order to collect funds on their deaths. Viatical fraud consists of agents recruiting people with terminal illnesses to purchase numerous life insurance policies with annuities attached to them. The terminally ill patient will obtain some of the money up until his or her death; however, the majority of the funds will end up in the hands of third-party investors. Doctors, salesmen, and other “insiders” may participate in this scheme until it becomes foiled by law enforcement authorities.
Workers’ Compensation Fraud
Workers’ compensation fraud involves the active attempt to collect benefits by faking an on-the-job accident. Perpetrators exaggerate the effects of a legitimate accident in order to collect more funds. Perpetrators typically commit workman’s comp fraud when they want to extend their benefits for a longer period of time than usually allotted. Many insurers and employers have responded by implementing strict requirements to qualify for these benefits, including the prompt reporting of an incident and a medical examination by qualified medical professionals. Employers may require their employees to obtain a second opinion from medical providers of their choice.
- What Is Workers’ Compensation Fraud? (PDF)
- Red Flags of Workman’s Comp Fraud (PDF)
- California Workers Compensation Fraud Laws
Fire and Arson Insurance Fraud
Fire insurance fraud occurs when property owners deliberately destroy or damage their property in order to collect funds from their insurance provider. Perpetrators may have an underlying motive centered around difficult financial positions, such as bankruptcy or foreclosure. Perpetrators typically recruit a co-conspirator to deliberately set fire to their home, automobile, or commercial establishment. The malicious intent involves a desire to collect insurance funds to pay off their debt or mortgage balance. Business owners may enlist professional arsonists to perform the act. Business owners may concoct elaborate schemes that may involve claiming damage to property or inventory that never existed, or was removed before the incident took place.
Property Insurance Fraud
Homeowners insurance fraud occurs when an individual deliberately submits a false claim on a homeowners property, or renters insurance policy for more than the damage sustained. This occurs when the homeowner overstates the value of stolen items after an actual burglary, or lying about the cause, date, and extent of legitimate damage during a natural disaster. Other forms of homeowners, property, and rental insurance fraud include intentionally damaging property to make a claim, staging a phony burglary or house invasion, and making a second claim for a loss that the property owner already collected from a prior claim. Perpetrators may fabricate evidence in collusion with crooked repairmen, contractors, or insurance adjustors. Falsifying medical bills for the sake of collecting more funds are not entirely uncommon with these types of insurance fraud claims.
Healthcare fraud occurs when an individual or group intentionally deceives, conceals, or misrepresents information in order to receive healthcare benefits. Healthcare fraud can be committed by either a member or provider. Membership fraud typically occurs when an individual deliberately conceals pre-existing conditions, fails to report coverage, or fails to discuss claims that were the result of a work-related injury. Provider insurance fraud occurs when unscrupulous physicians bill for services not rendered to the patient, or when they make alterations to claims submissions. Many so-called physicians will continue their practice while their licenses has been suspended or revoked. Others may perform treatments outside of their scope of practice.