(BPT) – While inflation continues to drive up home and auto insurance costs, fraud is a hidden culprit contributing to the hikes. Whether you’re an actual victim of insurance fraud or simply an active policyholder, the reality is that insurance fraud impacts everyone. And as the frequency and complexity of fraudulent activities increase, so does the cost of insurance for all policyholders.
What exactly is insurance fraud? It’s a deliberately deceptive act with the goal of receiving a wrongful payout from an insurance process. It can be committed by applicants, policyholders, third parties or even the insurance providers themselves – and it affects virtually every type of insurance including auto and homeowners.
‘The total cost of insurance fraud for non-health insurance is estimated to be more than $40 billion per year. To put that into perspective, insurance fraud costs the average U.S. family between $400 and $700 per year in the form of increased premiums,’ said Steve Wang, Manager, Divisional Claims/Head of Special Investigations Unit at Mercury Insurance.
Insurance fraud is committed in various ways, but the main offenses include fraudulent claims, application fraud and premium fraud. Of these, fraudulent claims occur most frequently, which involve offenders filing false or exaggerated claims to receive benefits they are not entitled to. For example, a policyholder may intentionally cause property damage in order to file a claim.
‘There are several common schemes consumers should be aware of. Staged auto accidents, adding damage to vehicles after a loss and switching drivers on accident reports are a few of the most prevalent scams. Additionally, there are crime rings that specialize in ‘slip and fall’ schemes, which involve fake injuries and false claims,’ said Wang. ‘Making our job even more difficult is the fact that today’s scammers are technologically savvy and have access to sophisticated equipment.
‘They routinely produce fake medical records, duplicate checks, and false identifications and business licenses. To maintain an advantage, we are constantly working to stay ahead of the technological curve,’ continued Wang.
Given the widespread ramifications of insurance fraud, consumers may be wondering what they can do to help combat it. According to Wang, if consumers aren’t looking for insurance fraud, they won’t find it. ‘I always tell people to document suspicious activity and incidents. When it comes to cracking these cases, the devil is in the details,’ he added.
Here are some other tips that consumers should be aware of:
- When looking at policies, verify the insurance company: Only buy from authorized companies and agents. Unauthorized insurance operations are illegal and policyholders are unprotected should the company go bankrupt. In California, consumers can verify this information here: https://www.insurance.ca.gov/0150-seniors/0200beforebuy/CheckInsCo.cfm. Know that if the price quoted sounds too good to be true, it probably is. Low premiums are great, but not if the insurer is unable to cover a claim.
- Fill out the application carefully: Never sign blank forms or blank applications. Incorrect, incomplete or false information on an application can jeopardize insurance coverage. It is a crime to supply false information on an insurance application or claim.
- Read the policy: Expect a copy of the policy from the insurer within a reasonable amount of time. Read it promptly to verify that it contains the proper coverage needed. If there is a discrepancy, contact the insurer immediately.
- Involved in an accident? Call the police: Always call the police and document unusual circumstances or activities. Gather as much information as possible at the scene of the accident.
- Maintain detailed records: This includes bills for collision repairs, home/property repairs and medical services. Keep copies of all insurance records, including copies of all premium payments.
- Be vigilant with billing: Watch for double billing or unexplained charges for any service received as part of an insurance claim. Avoid paying for premiums in cash and opt for checks or online payments.
When suspicious activity is observed, regardless of insurance provider, Wang urges witnesses to alert the SIU and to contact law enforcement by calling 800-835-6422 or reporting the incident online: https://www.nicb.org/how-we-help/report-fraud.
To learn more about insurance fraud and its ramifications, visit Uncovering the Truth: Understanding Insurance Fraud and Its Impact.
