Insurance fraud is making false claims to an insurance company in order to get compensated. This is a deliberate attempt to defraud an insurance provider.
Insurance fraud isn’t new, in fact it has been around since the beginning if insurance and has kept spreading and new ways to defraud the insurance companies are invented every day. In fact it would interest you to know that in Europe and America, billion of Euros are lost every year to fraudulent claims which make a significant portion of all claims received by insurers.
Types Of Insurance Fraud
There are Three main categories of Insurance fraud, based on the different false claims people make.
1. Claim Exaggeration:
This is for example, when someone with a home insurance claims he may have sustain damage, but then increases the amount of damage when reporting it to the insurance company and even going as far as including damages that may have been there years ago.
2. False Claims:
This is when someone makes a claim for damage that never even happened, or claims something that was never owned, has been stolen.
3. Staged Claims:
This is the most common type of insurance fraud, and many people have been sent to jail for this one. This happens when accidents (Mostly car accident or home fire) are staged by owners to get compensated by the insurance companies.
How Insurance Companies Detect Insurance Fraud
The Insurance companies spot these fraudulent claims when they compare new claims with previous payment made for such claim, and is a claim is unnecessarily huge, it’s a red flag for it to be handed over to a special investigator.
The history of the person making the claim is checked to see if he has a history of insurance fraud.
These Insurance companies rally round the different Law enforcement agencies for tips to detect fraud as well as individuals and businesses.
In time past there have been steep punishment for Insurance fraudsters, but this hasn’t deterred most of them, rather they just keep inventing new ways to milk money from the insurers.