The existence of insurance fraud is as old as the very existence of the commercial enterprise of insurance. There are diverse ways in which insurance frauds take place.
What is Insurance Fraud?
A wrongful act done intentionally to gain some kind of monetary or other benefits to which a person is, otherwise, not entitled is called an insurance fraud. Also, if someone purposely denies to a person a benefit due to him or her, it is said to be an insurance fraud.
Types of Insurance Frauds
Insurance frauds can be classified as:
Hard fraud: refers to the planning or inventing of a loss, such as an auto theft, fire or a collision that is covered by insurance, to claim the damages from the insurer. For example, the death of John Darwin (former teacher and prison officer) on a canoeing trip in 2002 was faked. The Briton was found alive in late 2007, claiming to have lost his memory. Sometimes, a group of criminals execute such schemes to make big money.
Soft fraud: or opportunistic fraud, as it is often called, is the more common type of fraud. Although the claims in this type of fraud are legitimate, the policyholders may exaggerate them. Also, misreporting of pre-existing or current conditions comes under soft fraud. For instance, some people keep the insurance providers unaware of an existing disease while buying health insurance. The purpose behind this fraud can be obtaining a lower premium in the contract.
Besides these, there can be as many types of insurance frauds as there are policies available. The major cases of insurance fraud take place in life, health, auto and property insurance.
How Can One Prevent Becoming an Insurance Fraud Victim?
Do some research about the company before buying a policy. A company’s record can indicate the quality of their product and commitment to customer satisfaction.
Confirm the stability of the company by looking out for its financial rating.
Get the policy contract in writing during the meeting with the insurance broker.
Before signing it, read the policy carefully.
One can remain safe from becoming a victim of insurance fraud by just being aware of what and from whom one is buying the policy.