Fighting Insurance Fraud
We've all heard the stories. A slumlord burns down the apartment house to collect on the insurance policy. In an effort to get a better premium rate, your neighbor underreports the length of his commute. Insurance fraud is anything that anyone does knowingly and deliberately for the purpose of obtaining an unwarranted financial gain at the expense of the insurer. Major scams or minor infractions, they're all examples of the same thing, and they can be committed by anyone connected to the insurance pipeline.
Nobody gets hurt, right?
Many people excuse insurance fraud. Policyholders claim that they're only recouping some of the high premiums they pay. Many professionals, regulated by peer organizations that do little to police or punish the activity, see insurance fraud as a minimum-risk, maximum-return means to shore up sagging profit margins. Law enforcement officials rarely give this sort of crime top priority. Even the insurance companies sometimes pay suspicious claims rather than suffer consumer perceptions of bad faith. So, if it's all a victimless crime, what's the harm?
The harm is, we all get hurt. According to the National Insurance Crime Bureau (NICB), insurance fraud is the nation's second-costliest white-collar crime, conceding the spotlight only to tax evasion. The losses reach $100 billion annually. How does that trickle down to you? Anyone who has any kind of insurance is paying more for it because of the costs of insurance fraud. The Coalition Against Insurance Fraud figures that the average American household coughs up an additional $1,000 per year in insurance premium payments to cover those costs. Aren't you hurting now?
Soft or hard, it's still fraud
Providing false or misleading information in an attempt to increase the chances of being accepted for insurance or to get the policy at a lower premium are examples of what the insurance industry considers soft fraud. Others include:
Underreporting the number of miles driven annually
Misrepresenting where the car is garaged
Omitting portions of a medical history on a health insurance application
Underreporting the number of employees who need workers' compensation coverage
Another form of soft fraud, sometimes called opportunity fraud, involves policyholders or other claimants who inflate a legitimate claim, as in:
Overstating on a loss form the value of items stolen from a business or home
Inflating an auto repair claim to cover the insurance policy's deductible
Exaggerating the extent of the injuries suffered in an auto accident
By comparison, hard fraud most often involves either staging or making up an event that results in an insurable loss. One of the costliest forms of insurance fraud around, a single conspiracy involving several parties (e.g., medical doctors and patients) can bilk the insurance system out of millions of dollars a year.
Hard fraud also includes actions committed by insurance company employees. For example, a life insurance agent collects your premium payments and never turns them in to the company; you (or your beneficiary) won't know that the insurance isn't in force until a claim is filed, and by then it's too late for you to complain. Or, a claims representative accepts a piece of the action from doctors in exchange for approving payment for procedures that the doctors never performed.
Counterattack
Here's what you can do to help combat insurance fraud:
Make sure your insurance company is licensed with your state's insurance department, and that your agent is licensed to sell policies for that company
Keep all of your insurance policies in a secure place, and keep your policy numbers private
As you receive statements from your insurance carrier(s), make sure the dates, types, and amounts charged and paid for services are correct
Check medical insurance statements carefully for double billings or billings for unperformed procedures
Periodically check to make sure your premium payments were received and credited to your account, and avoid paying your premiums in cash--you'll want a paper trail if there's ever any problems
Don't sign any blank claim forms
If you're in an accident, be wary of strangers approaching you to recommend a doctor or lawyer
If you suspect an instance of fraud, contact your state's insurance fraud unit, your insurer, and the NICB hotline at (800) TEL-NICB
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