As long as there have been insurance companies, people and companies have found ways to cheat the system. The main motivation for this fraud is to maximize their premiums or to increase their profits. Statistics estimate that this type of fraud amounts to billions of dollars of loss each year.
So what is insurance fraud? It is the act of purposely gaining monetary benefit from an insurance agency or program to which a person or business entity is not duly entitled. The term can also pertain to an insurance company illegally withholding benefits to a policy holder or holders.
Although insurance fraud is often seen as something relatively less serious than other crimes, due to the fact that no one is directly hurt, it actually causes financial damages that are not immediately evident. The cost of every fraudulent claim paid out by an insurer ends up being shouldered by other honest insurance policyholders. This is why it is good to be one step ahead of this kind of fraud. Furthermore, unlicensed or fake insurance companies must also be identified because they collect payments with no intent of ever paying their policyholders once a claim is made.
Insurance fraud is ultimately costly to both the companies and individuals involved and any person might be unknowing covering the cost of fraudulent claims by paying higher premiums.
Proving this type of fraud can be tricky, but there are tried and tested ways for legally proving insurance fraud.
Finding out if an insured is committing fraud:
Finding out if a company is transacting fraudulently:
Fraud is a substantial risk that comes with any insurance related activity. With some individual claims and insurance companies it may be difficult to assess whether fraud has occurred. However, this should never be a deterrent in taking a fraudulent claim to court.