Insurance fraud is one of the most costly and fastest growing white-collar crimes in America today. In fact, it is the second most common white-collar crime, behind tax evasion. The effect of this crime should not be underestimated, and is reported to cost Americans over $86 billion per year. That means that each household incurs losses of around $1,000 per year due to policy increases caused by fraudulent coverage claims.
Insurance fraud is described as any deceptive means used in order to gain from an insurance policy. Fraud may be committed at any time during a transaction by applicants for coverage, policyholders, third-party claimants or professionals who provide services to claimants.
Insurance fraud is commonly described as being ‘hard’ or ‘soft’. A hard form of this crime is one in which an accident, etc. is deliberately caused, or a claim is completely fabricated in order to receive financial gain from a policy. These types of scams can range throughout many insurance fields including auto, home, life, medical, fire, etc.
Soft fraud describes a case where claims are falsely exaggerated, often to cover a policy’s deductible. This is far more common than more elaborate hard frauds, and are sometimes referred to as ‘opportunistic frauds’. Falsely exaggerating automobile damage in an accident and embellishing the value or amount of items lost in a fire or robbery are both common forms that are included in the soft category. Similarly, soft fraud also encompasses withholding of information when applying for insurance. Commonly, people will neglect to report aspects of their medical history when applying for medical insurance, or will falsify information about their vehicle when applying for automobile coverage, such as mileage, location, etc. this is most commonly done in an attempt to receive lower premiums, or to ensure coverage in the first place. This is illegal and considered deception.
Types of fraud can be found throughout all fields, from health and life, to travelers insurance. For each industry, different methods are used in an attempt to profit from bogus claims. According to the industry’s statistics, up to 10% of all claims, averaged throughout all fields, are fraudulent.
While most people committing this crime may feel they are only taking money from the insurance company, they are actually stealing from every policy holder’s pocket. Every fraudulent claim is reflected back to the consumers through increased policies and higher deductibles.