Insurance fraud harms everyone involved: the insurance customer, the insurance agency, and insurance companies. The Coalition Against Insurance Fraud (CAIF) reports that nearly $80 billion per year is lost because of insurance fraud.
Insurance fraud is any act intended to gain fraudulently from an insurance process. There are many types of insurance fraud. Here are three common ones:
Misrepresentation happens when an insurance customer intentionally provides false information on an insurance application to receive a lower premium. For example, a customer may claim no accident or tickets when purchasing car insurance and receive a lower premium. However, when the driving report comes back, there are tickets and accidents. The customer received the premium of a driver with no tickets and accidents, and the insurance company was not withholding the premium associated with someone with a higher risk for being involved in an accident.
#2 Exaggerated claims
An example of an exaggerated claim would be overstating the value of items taken during a home burglary or claiming more storm damage to a home than what actually occurred. Personal injuries can also be exaggerated or completely false; an example would be one of a driver claiming whiplash after a car accident when the driver receives no physical injuries.
#3 Workers compensation fraud
Workers compensation fraud can happen in several forms. Policy-related fraud occurs when a company intentionally withholds information to gain a lower premium. This could be the number of employees it has or the type of work performed. An employee can also commit workers compensation fraud by claiming an injury when none has occurred or claiming an injury happened at work when it actually occurred at home or elsewhere while off duty. Medical providers commit workers compensation fraud by submitting bills for unnecessary medical procedures or tests performed for the sole purpose of collecting payment from the insurance company.
It’s important to complete insurance applications accurately and be truthful when reporting claims. Insurance fraud makes premiums higher for everyone and makes it harder for insurance agents to find affordable coverage for clients.