An Explanation of Insurance Fraud

Insurance fraud is an extremely common and detrimental crime that is being committed every day. It is the second most costly white collar crime in the United States, second only to tax evasion. This crime is an expensive and constant problem that costs policy holders more and more with every passing year. So what exactly is insurance fraud?

This form of fraud occurs when a person or party attempts to gain financial restitution from an insurance policy through deceptive means. In short, it is when someone makes a bogus claim. Each variety of fraud in this industry applies to a different type of coverage. Automobile, healthcare, home, fire, and life are just a few of the most common types of insurance deception.

According to statistics, up to 10% of all claims, averaged throughout all fields, are fraudulent. Health insurance fraud is the most common type, and costs policy holders $58 billion per year. For every blatantly fraudulent claim, there are several more exaggerations, which cost policy holders even more money. Most commonly, these exaggerations are an attempt to inflate claims on an originally sound policy claim. This is most frequently done in order to cover a policy’s deductible.

According to the Insurance Research Council, more than 1 out of every 3 bodily-injury claims from car accidents involve some form of fraud.

When people file false claims, they may think they are taking money from the insurance industry itself. This could not be any more untrue. For every claim filed, including fraudulent ones, the costs of the claim are reflected throughout the entire industry. These costs are therefore imposed upon the consumer, including me and you. This causes policies to become more and more expensive every year, making deductibles higher and coverage more costly. According to the Coalition Aainst Insurance Fraud, the cost of fraudulent assertions alone cost the average household between $800 and $1,000 per year. That means that, nationwide, insurance fraud costs policy holders $80 billion dollars per year. In terms of what type of benefits this could provide every year, consider this:

$80 billion dollars annually would pay for every single individual in the United States to have a full medical examination, annually. It would pay for over 16 million days in an intensive care unit in hospitals across the country, or 32 million CT scans, every single year.

As you can see, insurance fraud is an extremely destructive form of crime, which only gets worse with each passing year, and we are the victims.

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