Insurance fraud is one of the leading causes of financial instability and stress for families all over the United States. According to the FBI, insurance scams end up costing somewhere between $400 to $700 per annum to the average American family on insurance premiums.
This might not seem alarming, but the figure stacks up. To give perspective to that, consider that after the hurricane Katrina, $80 billion were provided by the government to mitigate damages. Out of this, $6 billion were lost to insurance fraud within 3 months.
“When it comes to insurance fraud prevention, you have to jump into the mind of a conman – beat them at their own game.”
There are numerous types of insurance frauds and here, we’ll go over some of the more common ones and how families can adopt insurance fraud prevention techniques to shield themselves from them.
Types of Insurance Fraud
As mentioned above, insurance scams can take many shapes, forms and names. However, when you look at it from a bird’s eye view, they all fall into four broad categories:
- People scamming insurance agents for personal gain
- Insurance agents scamming families
- People setting up elaborate schemes to make money off someone else’s insurance
- Selling insurance without a license and refusing payments when demanded
Here are some examples of insurance scams to show you how they can fall into these four categories:
- Identity theft
- Employee-agent fraud
- False claims
- Misrepresentation of amount payable by agent
- Faked death
- Insurance company fraud
Looking Out for & Preventing Insurance Fraud for Families
If you’d like to read up on some very shameful insurance fraud scams, the Insurance Fraud Hall of Shame is a very useful resource, as it can help you prepare for if you ever become victim to something like this.
Here are some examples to consider
- Identity theft, where identities of addicts were stolen to claim over $175 million in health insurance claim.
- A parent continued collecting disability checks after her son died. She had faked the disease as well.
- A salon owner burned his salon down and claimed $40,000 as insurance. The fire resulted in the deaths of two firefighters.
This is one of the most common insurance frauds and can range from car accidents, faked deaths, staged circumstances to much more. Insurance scammers usually attack families by jumping in front of their cars, attempting to claim damages.
People might hit your car with theirs as well, perhaps by break-testing in the middle of the road or driving straight into you with a ‘staged’ witness.
One surefire way to prevent this insurance fraud is to install a dashcam in your car.
As for slip and fall claims, you might have to install cameras on your property. Just make sure you are taking the necessary precautions if doing any construction at your place.
With the frequency of natural disasters increasing by the decade, so is the frequency of inflated claims. Take the Katrina example mention above, for instance.
Inflated claims are also particularly popular if someone gets injured because of perhaps the angle of your window (sun shining into their eyes), an animal in your lawn, or even an accident where you actually are at fault.
Here, insurance scammers demand for a sum much higher than what is owed. You can avoid this by remaining vigilant and performing due diligence in regards to the damage incurred.
Insurance Company Fraud
This goes without saying, insurance fraud isn’t exclusive to individuals but is also committed by agents or agencies. These include:
- Premium diversion
- Fee churning
- Underwriting, etc.
To prevent insurance fraud by agents or agencies, it is a good idea to check the licensure and reviews (if available) of the insurance provider before signing up with them. Trustworthy insurance providers are hard to come by and it might take some effort to find them, but once you do, you can rest assured that you’ll be treated right.
Legacy Armour is one such trustworthy insurance provider who doesn’t just offer you and your family good premiums, but also looks out for insurance fraud on your behalf! So get in touch today to learn more about our processes and how we can help you identify and prevent insurance fraud.