Insurance fraud
is a deliberate
deception
perpetrated
against or by an
insurance
company or agent
for the purpose
of financial
gain. Fraud may
be committed at
different points
in the insurance
transaction by
applicants for
insurance,
policyholders,
third-party
claimants or
professionals
who provide
services to
claimants.
Insurance agents
and company
employees may
also commit
insurance fraud.
Common frauds
include
“padding,” or
inflating actual
claims,
misrepresenting
facts on an
insurance
application,
submitting
claims for
injuries or
damage that
never occurred,
and “staging”
accidents.
Insurance fraud
may be
classified as
“hard” or
“soft.” Hard
fraud is a
deliberate
attempt either
to stage or
invent an
accident,
injury, theft,
arson or other
type of loss
that would be
covered under an
insurance
policy.
Soft fraud,
which is
sometimes called
opportunity
fraud,
occurs when a
policyholder or
claimant
exaggerates a
legitimate
claim. One
example of soft
fraud is the car
owner involved
in a “fender
bender” who pads
the claim to
cover the policy
deductible.
Another is
exaggerating the
amount and value
of items stolen
from a home or
business. Soft
fraud may also
occur when
people purposely
provide false
information to
influence the
underwriting
process in their
favor when
applying for
insurance. To
lower insurance
premiums or
increase the
likelihood that
the application
for insurance
will be
accepted, people
may underreport
the number of
miles driven,
misrepresent
where a car is
garaged, fail to
provide an
accurate medical
history when
applying for
health
insurance, or
falsify the
number of
employees and
the nature of
their work for
workers
compensation
coverage.
The
Insurance
Information
Institute
estimates
that
property/casualty
insurance
fraud
cost
insurers
about
$29
billion
in 2003.
The
total
cost of
all
kinds of
insurance
fraud
(including
life and
health
insurance)
is
estimated
to be
between
$85
billion
and $120
billion
a year.
(1)
Workers
compensation
insurance
only.
(2)
Workers
compensation
and
health
care
insurance
only.
(3)
Limited.
Source:
National
Insurance
Crime
Bureau;
state
insurance
departments.
Most
states
have
classified
insurance
fraud as
a
serious
crime
and
provide
immunity
for
those
who
report
insurance
fraud.
Immunity
statutes
protect
the
person
or
insurance
company
that
reports
insurance
fraud
from
criminal
and
civil
prosecution.
Most
states
have
enacted
these
laws.
Fraud
bureaus
are
state
law
enforcement
agencies,
mostly
set up
in the
department
of
insurance,
where
investigators
review
fraud
reports
and
begin
the
prosecution
process.
The
majority
of
states
have set
up fraud
bureaus.
Mandatory
insurer
fraud
plans
require
companies
to
formulate
a
program
for
fighting
fraud
and
sometimes
include
special
investigation
units to
identify
fraud
patterns.
Only 17
jurisdictions
require
insurers
to have
fraud
programs.
Mandatory
photo
inspection
laws
require
insurers
or their
agents
to
inspect
and
photograph
every
car they
insure
to
prevent
nonexistent
vehicles
from
being
insured
and then
reported
stolen.
Not
shown on
the
chart
are the
seven
states —
California,
Florida,
Minnesota,
New
Jersey,
Nevada,
Utah and
Massachussetts
— that
have
antirunner
laws.
Runners
are
people
who
recruit
phony
crash
victims,
directing
them to
complicit
chiropractors
and
doctors.
Travelers,
Allstate, Encompass, Deerbrook,
Metropolitan, Cumberland Mutual, Allied, AIG Friends Cove
Mutual, Progressive, Harleysville, Safeco,
General Casualty, Foremost,ZurichHartford, Commercial
Protective, Truckers, Hartford, USG, Bristol
West, Philadelphia Ins Co.Auto Insurance,
Homeowners Insurance, RV Insurance, Motorcycle
Insurance, Life InsurancePowersports
Insurance, Business Insurance, Commercial
Vehicle Insurance, Truck InsuranceAccident
Insurance, Disability Insurance, Health
Insurance, Flood Insurance, Aircraft Insurance
