Insurance fraud’s potency as a problem has gained greater attention in recent years, and rightfully so. Not a lot of people are exactly aware of its extent and how much it costs the industry. According to the National Insurance Crime Bureau (NICB), fraud costs the industry roughly $30 billion annually, which is a massive tally on its own. In addition, at least 10 percent of all property and casualty losses are fraudulent, with health insurance fraud costs registering higher numbers.
Another estimate, this time by the National Health Care Anti-Fraud Association puts the losses at approximately $51 billion for medical claims; all filed against insurance companies and attributed to fraudulent claims. The massive $21 billion discrepancy is nothing to scoff at, which apparently explains why claims vary greatly at times if one looks deeper into the numbers.
Insurance fraudsters differ greatly in terms of motives, but there is one most often noted reason: obtain monetary gain from some act that can be blamed on the insurance adjuster. One form of insurance fraud done mainly for financial gain is for an insured individual or business to deliberately inflate the value of an insured property. Once the property is either severely damaged or completely destroyed, the insured individual wrongly receives a greater monetary sum than the ruined property was actually worth.
In order to prevent insurance fraud, it is advised to identify it and stop the crime in its tracks. Companies can deter fraud before it happens by making sure that information given on applications is authentic, dedicating a core team or a corporate investigations professional to identify fraudulent claims, and partnering with special anti-fraud groups such as the NICB or the Coalition Against Insurance Fraud, as well as law enforcement agencies.
Still, how can insurance companies detect a fraudster? One method involves hiring a company like Phenix Investigations to render corporate investigative services. One specialty of such companies is surveillance, which can work perfectly with health or disability insurance claims where the client claims to be suffering from injuries that prevent them from working. A client typically fills out a questionnaire when applying for benefits which asks for permission to document daily activities, which will then be compared to the questionnaire. If the observed evidence says otherwise, payouts may not happen.
Various techniques allow insurers to protect against fraud and confirm the legitimacy of their client’s claims. The biggest tool to combat this issue, however, is simply being upfront and honest on the part of claimants, which can also help them get the full amount of compensation they’re rightfully entitled to.
How Can Insurance Fraud Be Prevented? NerdWallet.com, September 3, 2014
Mechanics Of A Fraudulent Insurance Claim, BusinessSecurity.net
Insurance Fraud Can Cost You Money, Nationwide.com
How Insurance Companies Detect Insurance Scams, Investopedia.com, February 14, 2012