The Daily Record, May 2014

The definition of Insurance Fraud is deceiving an insurance company or agent to collect money which a person is not entitled to. There are two types of insurance fraud:

• Hard fraud is when someone deliberately fakes an injury, theft or other accident to collect money illegally from insurance companies. An example of a hard fraud would be the fake slip-and-fall routine.
• Soft fraud is when people tell “white lies” to their insurance company. An example of a soft fraud would be a homeowner inflating the value of personal items stolen during a robbery, or someone understating the number of miles they drive annually to lower their auto premium.

While some would say the soft frauds seem harmless, both are crimes, and both have an impact on everyone’s insurance costs.

The Facts

The Coalition Against Insurance Fraud (“The Coalition”) estimates approximately $80 billion in fraudulent claims are made annually in the United States. This figure includes all lines of insurance. Healthcare fraud alone is estimated to cost Americans $54 billion a year. The Coalition reports that more than one third of people hurt in auto accidents exaggerate their injuries. This can add $13-$18 billion to America’s annual insurance bill. On the healthcare side, nearly one third of doctors exaggerate the severity of a patient’s illness to help avoid early discharge from a hospital.

How is it done?

The following are several examples of common insurance fraud schemes:

• Staged auto accidents: In staged auto accidents, drivers will maneuver innocent motorists into auto crashes. Often these accidents are staged by organized crime rings.
• Arson: With foreclosures still affecting many Americans, some desperate property owners turn to burning down their homes to collect insurance money to pay off loans and mortgages.
• Health insurance fraud: Health insurance fraud can include billing for unneeded lab tests, improper diagnoses to make patients seem sicker than they are, or billing for services that were not even provided.
• Faked death: Policy owners try to collect on life insurance policies of their loved ones by faking their death.
• Murder for insurance: Some will take it to another level to collect. People have murdered, or hired someone to murder a loved one in order to cash in on insurance policies.
• Auto shop scams: Drivers and body shop owners agree to inflate auto damage claims and share in the profit.
• Exaggerated claims: Claimants submit inflated or false claims to their insurer after an accident or theft occurs.
• Workers’ compensation fraud: A worker collects benefits while working for someone else, usually “off the books”. 

The Cost of fraud 

The $80 billion in fraudulent claims has a significant impact on all of us. The following are just some of the ways in which the cost of insurance fraud is passed on to innocent people.

• People can lose their life savings through insurance investment schemes. The elderly are especially vulnerable.
• People’s lives may be in danger due to doctors and health care professionals performing unneeded services to illegally inflate insurance claims.
• Consumer’s premiums stay high because the insurance companies have to pass the cost of fraud onto policyholders.
• Prices of consumer goods can rise due to businesses passing higher costs of their health and commercial insurance onto customers.
• Businesses lose a significant amount of income annually because fraud increases their costs for employee health coverage and business insurance.
• Innocent people die from insurance scams.

How can we help?

Insurance companies are fighting through fraud investigation units, educating consumers about fraud, and training employees to recognize possible fraud. What can we do as consumers to help fight the fraud? The Coalition put out the following list of items to consider in protecting yourself against insurance scams:

• Never sign blank insurance claim forms.
• Demand detailed bills for repairs and medical services.
• Make sure “free” services aren’t actually hidden in your insurance bill.
• Be wary of buying insurance from door-to-door or telephone sales people.
• Be suspicious if the price of insurance seems too low to be true.
• Contact your state insurance department to make sure the agent and company are licensed.
• Be wary if a car suddenly pulls in front of you, forcing you to follow dangerously close. You may be set up for a staged accident.

If you think that you are being scammed, contact your state insurance department and the National Insurance Crime Bureau immediately to report the fraud.

The fight continues

Despite the progress that has been made, insurance fraud is still a very serious concern for the United States. People continue to come up with new and improved ways to scam the system. Remember to stay alert, and ask questions if something doesn’t seem right. We all pay for insurance fraud in the end, so why not help combat it? Also, just imagine all the things that could be done with the $80 billion lost each year.