US Insurance Fraud, USA Insurance Fraud, Insurance Fraud USA, Insurance Fraud US

By: EconomyWatch   Date: 26 May 2010

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Committing a fraudulent act to claim payment from an insurer is referred to as US insurance fraud. The severity of the crime can vary from a slight exaggeration to deliberate damage or planning accidents. Organized rings with doctors, attorneys, cappers and other professionals as their members also carry out USA insurance fraud.

USA Insurance Fraud: Laws

According to an estimate by the Coalition Against Insurance Fraud, a total of around $80 billion were lost in the United States due to insurance fraud in 2006. Law, in all US states (except Virginia and Oregon), classifies insurance fraud as crime. Most of the states (41 of the 50) have fraud bureaus that review fraud reports and make investigations.


US Insurance Fraud: Spread over all Policies

Mentioned below are some of the ways in which US insurance fraud takes place in the major types of policies available:

Paper Collision (Auto): A conspiracy carried out by parties to prove a planned accident as legitimate. This is done by deliberately damaging the vehicle of the suspect or through the use of pre-damaged vehicles. Usually, law-enforcement is not called to the accident scene.

Disability (Health): An illegitimate claim against a disability policy is made so that the claimant continues to receive vocational or other benefits but is reported to be capable of performance that exceeds the alleged physical limitations.

Suspicious Policy Application (Life): Suspicious actions by the policyholder, such as misreporting of health conditions or the timing of application (in relation to the death of the insured), for monetary gains.

Misclassification (Workers’ Compensation): The workers are misclassified (for instance, roofers are classified as clerical) in a way that entitles them to employees’ compensation cover at a low premium. Also, misreporting of wages (as those of a position which is less prone to injury) to keep the premium lower is another type of insurance fraud.

Effects of USA Insurance Fraud

An insurance fraud can adversely affect those who have nothing to do with the fraudulent activities. This can be both:

  • direct: through accidental injury or damage, and
  • indirect: since such crimes lead to the insurance premium being raised.

  • To keep a check on US insurance fraud, nineteen American states have made it compulsory for insurance companies to formulate plans to ensure that no fraud takes place.


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