Overview of Insurance Fraud
Insurance fraud is a false claim made for financial gain. Consumers may misrepresent information to collect money that they would otherwise not be entitled to from their insurer. But, insurers can also defraud consumers by denying benefits rightly entitled to their consumers.
Many types of insurance fraud exist from scamming auto insurance to life insurance to property insurance. All types of insurance fraud can be divided into a “hard” or “soft” fraud.
Hard fraud includes someone staging a car accident, injury, arson, loss, break-in, or someone writing false bills to Medicare to illegally receive money from their insurance companies. This type of fraud often receives more media attention and it’s easier to detect. Hard fraud often involves criminal activity and the intention of squeezing millions of dollars out of insurance companies. But, the average person can also be found guilty of hard fraud.
Soft fraud is more difficult to detect. It happens when a person pads their insurance claim by telling “white lies”, such as, they’re feeling too ill to come to work, so they can receive worker’s compensation benefits that they wouldn’t have otherwise.
Worker’s compensation claims is the most frequent and expensive type of soft fraud. It costs insurance companies millions of dollars a year. As a result, insurance premiums are rising. Yet, approximately up to one-third of consumers don’t see anything wrong with employees receiving worker’s compensation benefits even if they are healthy enough to go back to work.
Recent polls show that people express anger towards hard fraud and would like to see the criminal serving time behind bars. However, more than 25 percent of people also thought soft fraud involving consumers padding insurance claims was acceptable. Even a higher percentage of people found the embellishment of claims and the misrepresentation of policy information in order to recover insurance deductibles and lower the amount of premium they owe to insurers, justifiable.
Though the industry does have its share of issues to contend with, it remains important to secure your personal and family's future with a term life insurance policy from a reputable insurance company.