Insurance is an integral part of your daily life. However, the need for insurance opens the door for individuals to take advantage of the system. Fraud occurs when someone lies to obtain any assistance they are not entitled to. This act is against the law and can cost you immensely should you file a fraudulent claim. Look at these tips to help recognize different types of fraud and what they mean.
What is Insurance Fraud
Insurance fraud is committing an illegal act done by the buyer or seller of the insurance policy. If the seller is involved in the scam, they provide you with a policy through a company that no longer exists, do not submit your premiums or churn your current policy. However, if the buyer is involved, they embellish claims, fake medical records or even fake a death to obtain money that is not rightfully theirs. Even though this sounds like something out of a movie, there are plenty of insurance frauds examples.
When fraud does occur, typically, it is at the hands of the policyholder. People participating in fraudulent activity cost innocent individuals higher premiums. Remember, insurance is set in place to protect you against risks, not earn you money.
How People Commit Auto Insurance Fraud
There are many different ways to commit auto insurance fraud. Any claims fall under two main categories: soft fraud and hard fraud. Both claims come with severe consequences, like high fines or jail time.
Soft fraud occurs when details of a valid claim get overdramatized, such as damage to the vehicle or injury to a person. This activity is an attempt to get more out of your insurance payout. For example, reporting a single claim for multiple accidents makes the damage appear worse, earning you more money.
Hard fraud is the more serious claim, both in the act and repercussions. This kind of fraud is when you intentionally cause damage to your vehicle by trying to make it a total loss. For instance, some individuals will burn their vehicles or plan a car wreck.
Why do People Commit Healthcare Fraud
Healthcare fraud is intentionally filing a dishonest medical claim to turn a profit. This crime affects both the business and the individual filing the claim, costing billions of dollars to companies every year. These claims come from the medical provider or a person reporting false claims to their insurance.
Medical providers can commit fraud in a few different ways. When they double bill you, they submit more than one claim for service. They can phantom bill you by filing for a service that was never done. Or, they can upcode and receive more money for a procedure that was not performed.
Patients can commit fraud when they use another person’s coverage as their own or provide their insurance for someone else. Also, going around to multiple doctors to get a controlled substance classifies as fraud.
What is Worker Compensation Fraud
Workers’ compensation is a plan put in place should workers get hurt on the job. It pays for everything from medical costs, wages lost, and other expenses incurred by the worker. However, employers are bound to come across dishonest employees sometime. Here are the three main types of fraud.
- Policy fraud is committed by an employer. They withhold information about your injury in hopes of paying a lesser premium.
- Claim-related fraud occurs when your employer falsely claims injuries or illnesses to pocket the worker’s compensation payout.
- Medical provider fraud is when your provider intentionally tries to profit by performing procedures solely to collect the insurance payment. Medical providers also benefit from kickback fraud done by pharmacists.
Any fraud can affect policyholders, legitimately hurt individuals and insurance companies. However, there are specific steps you can take to mitigate fraud.
Unfortunately, fraud is going to happen. So it is essential to educate yourself on the different ways it can occur. Educating yourself will help spot a situation with potential fraudulence and keep your premiums lower.