Insurance fraud is when deception is involved in the process of insurance. It could be a case when someone makes a fake claim from an insurance firm. It could also be when the insurer refuses to pay the claimant. Statistics have shown that the number of insurance frauds committed globally is rising.
The motive behind insurance frauds is greed. People are always looking to make a financial gain through insurance fraud. There are cases where people over-insure their property. Then they destroy it intentionally to claim insurance.
Types of insurance frauds:
Individuals take policies to insure their lives. When there is a reasonable amount due, they fake death and their beneficiaries claim the amount. They may appear after a few years and claim that they are suffering from memory loss.
This is when the claimant furnishes false information to the insurance company so as to avail benefits from them. Insured people commit this type of fraud in a number of ways. Some common ways are:
• Allowing the use of their policy information by someone else.
• There are cases where people claim the amount incurred for paying for prescriptions which are not prescribed by their doctor.
Medical providers commit this type of fraud as well. They may bill for services they have not provided supplies they may not have used or even altering existing claims.
This type of fraud is committed by health insurance companies also. They may delete the claims from their records, they may not pay the claimants or even deny the coverage for genuine parties.
In order to claim insurance, people stage accidents and collisions. It is also claimed when people report thefts of cars. It could also be claimed for a damage that existed before the policy was taken. Sometimes people claim coverage for an accident that may have occurred prior to taking the policy.
In this case, people damage their properties to make a claim. Sometimes they destroy goods which are not very valuable and make a claim for a higher amount. Individuals even fake theft in order to make a claim. Sometimes people claim the second insurance after having been covered for their losses by one insurance Company.
Insurance frauds affect the society as a whole. Fraudulent claims make insurance companies incur heavy losses. In order to make up for these losses, these companies raise the premiums of the honest policyholders. Hence, honest citizens pay a price for no fault of theirs.