Insurance is designed to protect you from risk. The world is an unpredictable place; you could be affected by a car accident, natural disaster, medical emergency or any of hundreds of other calamities without warning. When you purchase insurance, you make an agreement with your insurance provider to cover your loss when the unexpected happens. When everything works well, insurance is a lifesaver. You can get your car replaced, your house can be rebuilt or your medical bills can be covered.
What is Insurance Fraud?
Unfortunately, simply filing an insurance claim does not always work perfectly. Some people are tempted to invent losses that did not occur and attempt to recover money from their insurance company. This is called insurance fraud. According to the FBI, insurance fraud costs the industry over $40 billion each year. This means that the average American family must pay $400 to $700 per year in increased premiums to cover these losses.
Most insurance companies maintain their own insurance fraud investigation services to protect themselves from this type of criminal activity. There are hundreds of insurance scams, and criminals are coming up with new scams all the time.
Here are three of the most common types of insurance fraud:
False Insurance Claims
This is one of the simplest scams; read this example to see how it happens: a car owner sells his or her car to a disreputable wrecking yard that dismantles the car and sells it for pieces. Then, the owner will report the car as stolen and collect a payout from the insurance company. The owner gets his or her car replaced, and the wrecking yard makes a tidy profit on the parts. Because of people running frauds like this, honest people who have their cars stolen often must wait longer to be compensated, and everyone pays more for car insurance.
Inflated Repair Costs
This scam depends on a dishonest auto repair shop, construction contractor, or medical provider. Here is a typical example: a home is damaged by a storm. The homeowner and a dishonest contractor agree to a much higher price for the repair work. The homeowner gets a payout from the insurance company, and then splits the extra with the contractor. Because of people cheating insurance companies this way, insurance companies must have their own claims estimators who must investigate all claims and determine what the repair costs should be.
Intentional Damages
Arson is a common example of this scam. A business owner whose business is failing may intentionally set fire to the building. When the insurance company pays the damages, the owner pockets the money. Because of this common type of fraud, house and business fires are closely scrutinized by certified insurance fraud investigator.
Many people see insurance fraud as a victimless crime. After all, insurance companies in the United States earn over $1 trillion per year in profits; certainly, fraud does not make a significant impact in this amount, does it? Large or small, the impact is there, and insurance companies charge everyone more to cover this loss. Insurance fraud investigations may be inconvenient when it delays your insurance payment, but in the long run, it saves more than it costs.
_______________________________
Veriti Consulting LLC provides professional insurance fraud investigation services across the U.S.
Learn more about our business services by calling 855.232.4410 or contact us via email.
