False insurance claims

From ArticleWorld

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium and duty of care. The losses must be predictable on a macro level: Insurers need to know how much they would be required to pay when the insured-for event occurs. Most types of insurance have maximum levels of payouts, but not all do, notably health insurance.

Insurance fraud or false insurance claims are insurance claims filed with the intent to defraud an insurance provider. Insurance fraud hurts the average person in two ways. First, all fraud costs, including losses, investigations, etc., are paid for by the insured through higher premiums, or, in the case of government insurance like Medicare, in higher taxes. Second, if a particular individual is the target for the fraud, they have costs such as deductible payments, loss of property use, etc., as well as higher premiums from the claim loss and the potential for denial of future coverage.

Insurance fraud occurs when people deceive an insurance company or agent to collect money to which they aren’t entitled. Similarly, insurers and agents also can defraud consumers, or even each other. Insurance fraud occurs every day and in every state. People of all races, incomes and ages are victimized. Insurance fraud costs Americans at least $80 billion a year, or nearly $950 for each family, the Coalition Against Insurance Fraud estimates. Insurance fraud is hard to measure because so much goes undetected, and complete research has yet to be done. Still, we have enough evidence to know that fraud is widespread — and expensive. Healthcare fraud alone costs Americans $54 billion a year, the Coalition Against Insurance Fraud estimates. More than one third of people hurt in auto accidents exaggerate their injuries. This adds $13-$18 billion to America’s annual insurance bill, notes a study by the Rand Institute for Civil Justice.

Someone deliberately fakes an accident, injury, theft, arson or other loss to collect money illegally from insurance companies. Crooks often act alone, but increasingly, organized crime rings stage large schemes that steal millions of dollars. Normally honest people often tell "little white lies" to their insurance company. Many people think it’s just harmless fudging. But soft fraud is a crime, and raises everyone’s insurance costs.

This study is a snapshot of the state agencies charged with detecting, deterring and, in some cases, prosecuting insurance fraud. The purpose of this research is to achieve a greater understanding of the structure, responsibility and overall activity of insurance fraud bureaus across the United States. This project focuses on insurance fraud bureaus that were established through legislation.

There are many ways to commit insurance fraud. People fake car accidents, job injuries, and arson. Ten percent of auto, home, and business insurance claims are either frauds or they are inflated. The most common insurance fraud cases are fake car accidents, fake accident claims, fake job injuries, and arson.

Health insurance is another common fraud. The biggest fraud in the health insurance is medicare and medicade. Some people will get people to hurt them on purpose to fake an injury or they will wreck their car on purpose. Some people hide their cars and say that they were stolen. If people were honest, maybe our insurance rates would not be so high. If fraud was a business, it would be one of the top businesses in the world.

Some memorable examples of insurance fraud include the following:Former British Government minister John Stonehouse went missing in 1974 from a beach in Miami. He was discovered living under an assumed name in Australia. Derek Nicholson and Nikole Nagle were accused of attempting to defraud a life insurance company for $1 million after Mr Nicholson apparently went missing in New Jersey in July 2003 and Ms Nagle reported him missing and made a claim on the policy. In the United States insurance fraud is estimated to cost US$875 per person per year with The Coalition Against Insurance Fraud estimating the loss to be $80 billion per year and Medicare estimating fraud in its system costs the government $179 billion per year. The penalties of committing insurance fraud are fines up to jail time. In some cases, insurance fraud is considered a felony.