Risky Business

How Insurance Fraud Affects All of Us

Hi Everyone,

Following my blog last week on rising insurance rates I received a question about how Fraud affects premiums across the board.

In my biz, there are typically 2 types of Fraud, Hard Fraud and Soft Fraud, both with very real consequences when caught.  Everyone knows about Hard Fraud, the person torching their own unit, or arranging to have it stolen so that the total vehicle value is presumably replaced.

But what about Soft Fraud?  This type of Fraud is actually far more prevalent.  It occurs when someone has a legitimate claim, but then exaggerates the extent of the damages hoping to receive more of a payout. 

Both types of Fraud can have serious ramifications for the guilty parties, with civil and criminal consequences.

Suspicious claims, including simply "exaggeration of claim", are submitted to "special investigative units", or SIUs for further investigation.  These units generally consist of experienced claims adjusters with special training in investigating fraudulent claims.  These investigators look for certain "symptoms" associated with false claims.  If evidence is found, claims are declined per contract, and prosecution can then ensue through a Fraud Bureau.

Forty One states have specific Fraud Bureaus.  This is when the prosecution process begins by law enforcement.

In addition, the NICB (National Insurance Crime Bureau) has been at the forefront of tracking and recording patterns of claims.  Thanks to computerization, this not-for-profit organization of strategic partners convenes crimes that may not be easily detected by the naked eye, tracing back for years.

Insurance companies have dealt with every trick in the book when it comes to Insurance Fraud and investigate any questionable claim to the utmost degree.  Nonetheless, they can't catch them all, and claims that are paid out in error continue to cost all of us in higher premiums in any insurance segment. 

Unfortunately, our society's growing acceptance of the "lottery" mentality regarding any kind of fraudulent insurance payout or ill-gained government recompense continues to extort the rest of us.

Warm Regards,

Shelly Benisch, CIC   [email protected]   www.myCISagent.com
Commercial Insurance Solutions (CIS)