According to the Coalition Against Insurance Fraud (CAIF), insurance scams cost Americans over $300 billion annually. These scams can take various forms and can be perpetrated by both individuals and organized groups. Here are six common insurance scams to be aware of, personally and professionally.
Staged accidents are pretty self-explanatory and pretty common nowadays. In this type of scam, individuals deliberately cause accidents or stage fake accidents to make fraudulent insurance claims. The planned accidents may involve multiple vehicles or innocent victims who are unaware of the fraudulent intent, so multiple injuries may occur in the process. The fraudsters then submit claims for property damage, injuries, or medical expenses.
Fake or Exaggerated Injuries
Fake claims are serious business considering experienced fraudsters often know how to make them seem real on record or in court. Therefore, some individuals may fabricate or exaggerate injuries following a genuine accident or even fake injuries altogether. They may seek unnecessary medical treatment or provide false medical documentation to support their claims, aiming to receive higher compensation from insurance companies.
Insurance Premium Fraud
This type of scam targets insurance providers directly. Fraudsters may create fictitious insurance companies or agents, offering policies at extremely low rates or promising exaggerated coverage. They collect premiums from unsuspecting customers but provide no coverage which, in turn, results in no insurance protection for their victims. There’s also an extension of this type of fraud called premium diversion. According to the FBI, this is the most common type of insurance fraud since it involves internal embezzling within the insurance companies. In this type of insurance fraud, the insurance agent pockets the premium money they’re paid rather than sending it to the underwriter.
Arson and Property Damage
Arson and property damage scam involve intentionally setting fire to property or causing deliberate damage to collect insurance money. Perpetrators may target their own personal property and business, but they may also collaborate with others to carry out larger-scale frauds. This type of scam is illegal, but it can also be incredibly dangerous.
Identity Theft and Fraudulent Policies
Identity theft is a common concern, but it can extend to insurance fraud. In this case, criminals may steal another person’s identity and use it to purchase insurance policies. They can then file fraudulent claims for accidents or damages that never occurred. This scam can result in a financial loss not only for the victim whose identity was stolen but also for the insurance company.
Health Insurance Fraud
Health insurance scams involve various schemes to defraud health insurance providers. These can include billing for services not rendered, overbilling, or providing unnecessary medical treatments. Fraudsters may also engage in prescription fraud, where they obtain and sell prescription medications illegally.
The above are just a few examples of insurance scams, and new options emerge over time. But regardless of the scam, it almost always costs companies and their clients extra money in the long run. Insurance companies have measures in place to detect and investigate potential fraud, but it’s often not enough to catch some of the more dedicated criminals. Be sure to contact us when you’re ready to hire a corporate investigator who can do a lot more than wait or prepare for the next attack on your business.