Insurer fraud

Insurance fraud is any act committed with the intent to obtain a fraudulent outcome from an insurance process. This may occur when a claimant attempts to obtain some benefit or advantage to which they are not otherwise entitled, or when an insurer knowingly denies some benefit that is due. According to the United States Federal Bureau of Investigation the most common schemes include: Premium Diversion, Fee Churning, Asset Diversion, and Workers Compensation Fraud. The perpetrators in these schemes can be both insurance company employees and claimants.False insurance claims are insurance claims filed with the intent to defraud an insurance provider.

Insurance fraud has existed since the beginning of insurance as a commercial enterprise. Fraudulent claims account for a significant portion of all claims received by insurers, and cost billions of dollars annually. Types of insurance fraud are diverse, and occur in all areas of insurance. Insurance crimes also range in severity, from slightly exaggerating claims to deliberately causing accidents or damage. Fraudulent activities affect the lives of innocent people, both directly through accidental or intentional injury or damage, and indirectly as these crimes cause insurance premiums to be higher. Insurance fraud poses a significant problem, and governments and other organizations make efforts to deter such activities.

An epigram by the Roman poet Martial provides a clear evidence the phenomenon of insurance fraud was already known in the Roman Empire during the First Century AD :

The “chief motive in all insurance crimes is financial profit.” Insurance contracts provide both the insured and the insurer with opportunities for exploitation.

According to the Coalition Against Insurance Fraud, the causes vary, but are usually centered on greed, and on holes in the protections against fraud. Often, those who commit insurance fraud view it as a low-risk, lucrative enterprise. For example, drug dealers who have entered insurance fraud think it’s safer and more profitable than working street corners. Compared to those for other crimes, court sentences for insurance fraud can be lenient, reducing the risk of extended punishment. Though insurers try to fight fraud, some will pay suspicious claims anyway; settling such claims is often cheaper than legal action.

Another reason for fraud is over-insurance, when the amount insured is greater than the actual value of the property insured. This condition can be very difficult to avoid, especially since an insurance provider might sometimes encourage it in order to obtain greater profits. This allows fraudsters to make profits by destroying their property because the payment they receive from their insurers is of greater value than the property they destroy. The most common forms of insurance fraud are reframing a non-insured damage in order to make it an event covered by insurance and inflating the value of the loss.

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Wikipedia