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Types of Insurance Fraud

Types of Insurance Fraud

Insurance fraud is an illegal act in which someone lies or intentionally misrepresents facts about insurance for financial gain. Knowing the common types of insurance fraud can help you recognize and  prevent it.

Insurance fraud occurs when individuals deceive an insurance company, agent, or other person to try to obtain money to which they are not entitled. It happens when someone puts false information on an insurance application and when false or misleading information is given, or important information is omitted in an insurance transaction or claim.

Crash and Buy

An individual purchased an auto policy after an accident occurred and reported the accident to the insurer with the wrong date of loss.

Duplicate Claims

An insured was involved in an accident with front bumper damage. Her claim was paid but did not have this damage repaired. She was involved another accident later and caused additional damages to front bumper. She attempted to collect monies for prior damages as well.

False Claims

An insured reported he hit a deer causing damage to his vehicle, but damages did not appear consistent with a deer strike. Also, the insured lowered his comprehensive deductible right before the accident.

Exaggerated Injury

A claimant was involved in a low impact accident with cosmetic damages to both vehicles. Claimant alleged neck and back pain and received treatment.

Preexisting Damages

Claimant alleged that a driver struck his vehicle in a parking lot. However, since the damages did not match the impact and had rust in metal, the insurance company determined that damages of the claimant vehicle were pre-existing prior to this accident.

Workers’ Compensation fraud can be very simple or very complicated. From faked job-related accidents to complex “mills” involving medical and legal providers billing for services never rendered, this type of claimant fraud is very common. Examples include:

  • A company employee knowingly files a claim(s) for injuries that did not occur
  • Receipt of total temporary disability benefits as a result of lying about the ability to work or other employment
  • Medical/legal providers bill for nonexistent services or for more time than was actually spent
  • Employer does not obtain Worker’s Compensation insurance when required to do so (three or more full time employees) by law.
  • Employer lies about the nature of the work involved or about payroll (number of employees and their salaries) in order to receive lower insurance rates

People commit homeowner fraud when they exaggerate, pad claims, or file fake claims, including burglary and arson claims.

Slip and sue, slip and fall, slip and trip, whatever you call it, if someone pretends to fall and get hurt, or claim they fell when there was no fall at all, it’s fraud. When it comes to slip and fall fraud, video can mean the difference between a fake claim being denied, and a business being responsible for an illegitimate claim. And while video is more prevalent than it used to be, many fraudulent slip and falls still go under the radar. What is someone after when they commit fraud? Money. In a slip and fall, after factoring in medical bills, treatments, lost wages, etc., a claim could cost as much as $40,000 dollars! -Information courtesy of the NICB

Insurance agents commit fraud when they sell fake policies, lie on an insurance application, or keep your premium for their personal use.

Any violator of this section is guilty of a felony and shall be subject to a term of imprisonment not to exceed fifteen (15) years, or a fine not to exceed fifteen thousand dollars ($15,000), or both.  The violator shall be ordered to make restitution to the insurer or any other person for any financial loss sustained as a result of a violation of this section. Each instance of violation may be considered a separate offense.

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