How The Insurers Defend Themselves Against Insurance Frauds?
Gradual rise in the insurance costs is a cause of concern amongst the existing insurance policy holders, as well as for the new insurance applicants
. The rise in premiums is inevitable since the industry suffers heavy losses each year due to insurance frauds. Undetected insurance frauds affect the insurers by costing time, money and, in certain cases, reputation as well. The insurers are there to run their after all. They raise the costs of insurance coverage, to recover their losses. In the end, the policy owners have to bear the excess costs.Insurance frauds usually occur due to the negligence of the insurance professionals that evaluate the risks for the company. The frauds usually occur in two phases:
The application phase - Insurance applicants may provide false information to the insurers. The underwriters evaluate the risks associated with every insurance applicant and accordingly, approve or reject their application. Those who intend to commit insurance frauds may present false claim history or suppress pre-existing conditions to obtain low rates or wider coverage. If the underwriters fail to recognize the risks, it may cost the insurer afterwards.
The claim phase - False claims and exaggerated claims are other forms of insurance frauds that cost the insurance companies a lot of money. The insurers often end up paying for accidental damages that may never have happened in the first place. Scammers may buy multiple insurance coverage for same property, and forward claims for financial gains. The insurers are often fooled into paying for properties that don't even exist. Accidents are staged or faked to claim for insurance money. False estimates are forwarded to the insurers when claiming for losses or damages. Negligence of the insurance appraisers, examiners, investigators and adjusters result in loss for the companies.
How the insurance companies identify fraudsters?
Insurance companies also have their own means to identify insurance frauds. The insurance frauds are usually tracked down in the following ways:
Third party reports - Insurers rely a lot on the leads provided by third parties. The third party tips might be forwarded through anonymous phone calls. Tips from neighbors, family members and law enforcement officials, police reports work as significant clues to detect the insurance frauds.
Investigating claims - Insurance companies check the details of the claims that have been forwarded by the policyholder. Similar risks are supposed to cause similar form of damages. The claims are thereby compared to check the extent of loss. Those which are found to be suspicious or seem to exaggerating about the extent of losses have to undergo further investigation before they are paid for.
Reviewing claims history - The claims history of a policy holder is usually reviewed by the insurance company before they compensate for the losses. Even if the insurer is changed, the claims history will reveal about the previous accidents for which claims have been made. Repeated claims against a policy arouse suspicion, and insurers usually sanction a definite number of claims before terminating coverage. Any discrepancy is thoroughly scrutinized for staged accidents or inflated claims.
Insurance frauds have been on the rise in the recent years. Just the auto insurance frauds in a year result in a loss of $7 billion for the insurance industry. This has evidently made the insurance companies strict about approving the claims. Even the regular insurance claims are treated with suspicion. Insurance policy holders are thereby recommended to save every minutest detail of an accident and the resultant injuries or losses. This will be helpful when a claim has to be filed for a mishap.
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