Insurance Fraud – What It Is & How to Spot It
Insurance fraud is a major issue that many people are unaware of. Anyone can commit fraud and there are different types too.
It’s estimated that fraud amounts to about $32 billion every year. (III)
Keep reading to find out what you need to know about insurance fraud and how to spot it.
Types of Fraud
There are two general types of fraud.
- Hard Fraud: this is when someone deliberately fabricates claims or fakes accidents.
- Soft Fraud (Opportunistic Fraud): this is when someone lies about a legitimate claim.
While these types are applied as a blanket over all insurance, we have breakdowns of common ways people commit fraud based on the type of policy or claim. This includes:
- Auto Insurance Fraud: rate evasion (misrepresented facts on apps, false SSN, use of a vehicle, and false address), owner give-up (abandoned vehicle or sets it on fire), title washing, reporting a stolen vehicle that’s been disposed by the owner, thieves using VINs for stolen cars of the same make and models, and airbag fraud committed by mechanics.
- Workers Compensation Fraud: misrepresentation of payroll or type of work, upcoding (exaggerated treatment), coverage under different names (attempting to avoid a claim), and lost income benefits. Common warning signs include reports on Monday morning, after a delay, before or after a strike or layoff, without a witness, without treatment, and suspicious behavior before a claim.
- Crop Insurance Fraud: repeat filings on questionable claims is normally the red flag here. The U.S. Government has also increased growing season inspections and satellite images when dealing with questionable claims.
How to Spot & Stop Insurance Fraud
It’s recommended that you become familiar with your customers and the types of fraud most commonly committed. This can help your overall awareness of noticing signs of fraud. As far as what you can do, notify law enforcement agencies, withhold payments and collect any evidence. Most companies have special investigation units that help identify fraud.
There is also new technology that can help you spot fraud and you most likely use it every day: social media. Social media is filled with evidence that could help you spot fraud. They don’t recommend actively “searching” for fraud, but it is recommended that you showcase the importance of being honest with your insurance.
The Coalition Against Insurance Fraud pushes 3 outreach goals:
- Be social. Steadily expanding social-media using influential channels such as Twitter, Facebook, and Tumblr.
- Think visual. Making fraud a visual crib for a visual society.
- Go mobile. Create an app for easy viewing of Coalition consumer material on mobile devices.
The Coalition Against Insurance Fraud asks that agents share these messages:
- Fraud victimizes everyone.
- Committing fraud can wreck your life.
- Go slow, stay alert, and avoid being victimized.
- Report scams.
If ever you suspect a fraudulent claim, ask a “senior” co-worker what you need to do. You can also call another agent that you have met and trust. It doesn’t hurt to ask.
The Insurance Connection is the Master Agency for the Strategic Independent Agents Alliance (SIAA) in the western portion of Ohio.