Insurance Fraud is an illegal act committed by both the buyer and seller of an insurance contract. Insurance fraud by the issuers includes failing to submit premiums, and churning policies to create more commissions, selling policies from non-existent companies. Buyer fraud includes exaggerated claims, falsified medical history, faked death or kidnapping, murder, post-dated policies, etc.
Insurance Fraud According to the FBI, insurance fraud costs the average American family between $400 and $700 more a year on their insurance premiums.
There are many different types of insurance fraud such as Individuals scamming their own insurance for personal gains. People collaborating to defraud insurance together. Elaborate schemes set up by third parties to scam both the insured people and the insurers in a claim. In this article, you will see more detailed facts on insurance fraud. Also, with a round-up of some extreme insurance fraud cases scams, and examples.
Examples of Different Types of Insurance Fraud
Fraud occurs both on an individual level, and on the corporate level. Fraud schemes occur in many categories, including:
- Identify theft.
- Scams that start on social media, or online shopping scams.
- Hacking and cybercrime.
- Employee-agent fraud.
- Falsified Claims.
These are the typical examples of the different types of insurance fraud.
Extreme Fraud Case Examples
Each year there are many unbelievable cases of insurance fraud; fraud crimes cost $80 billion dollars annually. According to the Insurance Fraud Hall of Shame here. For the past 20 years, it has reviewed many of these fraud cases, electing a list of insurance criminals called the Shamers, to put a human face on fraud.
In 2018, one medical supply scam had scammers contacting people on Medicare to get their social insurance numbers and personal information. Then the scammers would use the information to order medical equipment, costing taxpayers and Medicare millions of dollars. The Insurance Fraud Hall of Shame is one resource that lists some extreme cases of insurance fraud in 2020. Here are some extreme and terrible fraud examples:
- Turning against family members to collect money is no stranger to the criminals in the Hall of Shame. In the 2018 Hall of Shame, a parent poisoned their 15-month-old son to get the $50,000 life insurance, lied about his medical conditions, and then continued to collect the disability checks after he died.
- In 2020’s list, a son turns against his mother, hiring someone to kill his mother to collect on the life insurance and fund a glamorous lifestyle.
- A Texas man organized a gang to destroy rundown homes after buying fraudulent insurance policies to cover the said homes. They damaged at least a dozen homes, burning them or flooding them to collect on the insurance, with claims of $1.7 million.
- A caregiver starved a disabled man and denied him medicine stealing over $107,000 through false Medicaid health insurance claims.
Health Insurance Fraud Examples
Health insurance provides scammers with many opportunities to fraud people and insurance companies. Some common health insurance fraud include:
- Medical Identity theft
- Medical billing fraud. A lot of people have challenges not understanding their medical bills. Billing them above the actual amount. Such fraud might be harder to detect, especially if you are not paying attention.
- So of government-funded programs like Medicare and Medicaid have huge fraud exposures to insurance fraud. All these fraudulent claims and activities end up costing the taxpayer money.
Examples of Home Insurance and Renter Insurance Fraud
Here are some typical examples of Home insurance fraud:
- People claiming they have been robbed when the items or cash never existed.
- Homeowners inflating insurance claims to get more money than their actual loss
- People making false declarations or not disclosing full or truthful information.
- People selling their belongings and then claiming they were robbed
- Also, people burning their house down when they are in financial hardship
These are few examples of Home insurance and renter insurance fraud.
Car Insurance Fraudulent Examples
Car insurance scams happen in many different situations. Sometimes it is the insured person who stages a fraud. Other times they may be a legitimate car accident, but then have the auto repair shop, the towing company, or other parties involved in fraud without even realizing it. Let’s see some examples:
- Repair shops charging for extra work or time inaccurately
- A staged car crashes
- Using used spare parts but charging for new parts
- People selling their cars to chop shops to get the money for parts and then claiming the car was stolen
Learn more about avoiding car insurance repair scams from National Insurance Crime Bureau (NICB) here.
However, Fraud comes in various forms, some of them are obvious, but then there are also circumstances where information can be omitted. Or You may not report events of happenings to an insurance company in full detail. If you conceal information or lie about the details of a claim, this is fraud. Insurance fraud can be defined as any time there is a deliberate deception that results in your gain, this can be when you’re applying for insurance, failing to report changes in circumstance, or making a claim.
Life Insurance Fraud Examples
Life Insurance fraud takes place in various patterns, see some examples:
- People trying to take insurance out on others when they know they have a short lifespan and not declaring medical issues
- Purchasing of life insurance under false circumstances
- Fake agents pretending they are agents trying to scam you.
Examples of Fraud by Insurance Agents and Insurance Company Employees
It may sound weird but know that insurance fraud happens inside the industry as well. Many times we think insurance companies are being so vigilant when it has to do with examining claims closely.
Insurance fraud happens with underwriters, adjusters, and unfortunately with dishonest agents too. If you suspect fraud or dishonest or unprofessional behavior from someone in the insurance industry, you can contact your State Insurance Commissioner’s Office to get help and guidance. Also, you can also report fraud to the National Insurance Crime Bureau (NICB) or National Center for Disaster Fraud.
Always be cautious with your medical bills, protect your identity, and never be afraid to check references or call the insurance company with questions if you suspect something is wrong with a claim. The list of insurance fraud cases that happen with insurance will always be growing since there will always be criminals who will look for ways to profit for themselves without any regard for the cost of fraud on society or others.
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