07 Aug 2021

Understanding Insurance Fraud To Prevent Financial Damage

 

Insurance fraud is an illegal act on the part of the buyer or seller of an insurance contract. Insurance fraud from the seller includes selling policies from non-existent companies, failure in  submitting premiums, and creating policies to generate more commissions. From the buyer’s side, insurance fraud involves exaggerated claims, false medical records, post-dated policies, staged death/kidnapping and murder. Both buyers and sellers of insurance are involved in such frauds. 

  • Insurance fraud consists of any misuse of insurance policies in order to illegally benefit from it.
  • It is usually an attempt to exploit an insurance contract for financial gain. 
  • The majority of insurance fraud cases have false or heightened claims.

 

What is Hard Insurance Fraud?

Hard insurance fraud needs planning and maybe even an insider to help the client to get money from an insurance company. For example, getting into an accident on purpose, so that one can claim the insurance money. Another really extreme form of hard insurance fraud would be to fake your own death for the life insurance death benefit. In short, hard insurance fraud would include cases such as:

  • Slamming hard on the brakes to cause a car accident.
  • Developing a scheme to create an insurance claim.
  • Faking a death to claim life insurance.

 

What is Soft Insurance Fraud?

Soft insurance fraud is generally not planned, and arises when the opportunity presents itself. For example, getting into a car accident, and claiming one’s injuries are worse than they really are. Hence, one gets a bigger settlement than they would otherwise. 

In short, soft insurance fraud would include instances like:

  • Claiming that one’s injuries are more severe than they actually are.
  • Claiming that stolen property is worth more than it really is.
  • Exaggerating claims that would otherwise be legitimate.

 

Some common types of insurance fraud to watch out for in India are:

Policyholder fraud and/or claims fraud: Fraud against the company in the purchase or execution of an insurance product, including fraud while making a claim. 

Intermediary fraud: Fraud carried out by an insurance agent/corporate agent/intermediary third party administrators (TPA) against the company or policy holders.

Internal fraud: Fraud/misconduct against the company by its Director, Manager or any officer or staff member. 

Application fraud: Here, the client, despite being aware of all the facts related to his pre-existing diseases, conditions, DoB, etc. enters the wrong information. There are also certain scenarios where many agents or insurers encourage clients to withhold their diseases or enter false information to pay fewer premiums.

Medical identity theft: Here, a policy holder’s name is wrongly used without the knowledge of the person to gain free medical services. 

Individuals who are looking to purchase insurance must watch out for these scams in order to avoid any financial damages to themselves or their families. If you suspect that you have been a victim of such a fraud, it is recommended to get in touch with an investigative agency who can get into the matter and evaluate it.

On the other hand, in many cases, insurance buyers make fraudulent claims in order to monetise their insurance purchase. As in some of the cases above, a buyer might fabricate scenarios or deliberately create a situation that can help him or her gain financially through the insurance agreement. 

A popular case of such fraudulent claims is that of staged fires. People have been known to set fire to their own homes and make large claims on their insurance. They might even remove the most valuable items from the home and then make claims for the expensive items. Unfortunately for them, these claims are easy to investigate and understand if the fire was deliberate. Investigators can even identify if the items claimed on the insurance were present during the fire or not. 

Other popular insurance scams include burglary and minor accidents which are staged for financial benefit. It is essential that insurance companies who receive such claim requests look into these incidents thoroughly to evaluate the legitimacy of the claims. 

Globe Detective Agency has a pan-India network of professional investigators and is positioned to provide prompt investigation for questionable travel, death or other insurance claims. GDA conducts thorough investigations into fraudulent or suspicious claims to verify their authenticity. Their services include verification of claims, locating and interviewing witnesses, conducting surveillance, background checks and more. Get in touch with Globe Detective Agency.