Consumers Are the Front Line in Fighting Insurance Fraud

The U.S. loses approximately $308.6 billion in insurance fraud, leading to each policyholder paying $900 more through annual premium increases, according to the Coalition Against Insurance Fraud.

Scams affecting American policyholders and companies are among the most pervasive financial crimes in the nation. The cost of fraudulent claims hits insurers first, but eventually consumers feel the impact.

“The cost and pain from insurance fraud is not invisible and is not felt by insurers alone – it hurts everyone,” said Ray Duncan, west region director of operations of the National Insurance Crime Bureau (NICB).

Consumers can be the first line of defense against fraud, learning the warning signs of fraud and the process of reporting suspected insurance crimes to the proper authorities.

“By recognizing common or seemingly innocent insurance fraud schemes and reporting suspicious activity, you can help reduce the incidence and cost of these schemes for everyone,” Duncan said.

Insurance fraud includes any scheme in which someone deceives an insurance company or consumer to reap financial gain from their insurance policy, from exaggerating what would be legitimate claims to staging accidents, fabricating property damage, or billing for services that never rendered.

Spotting Insurance Fraud

Fraud schemes of all types often rely on moments of vulnerability where victims are most susceptible to deception such as after car crashes, during medical visits, or in the aftermath of a natural disaster. Scammers exploit confusion and pressure their targets into quick decisions, often disguising their schemes as legitimate, everyday business practices.

“All of us can take steps to protect ourselves and educate those around us,” Duncan said. “These preventative measures can help to stop criminals before they take advantage of others.”

Consumers can watch out for red flags when they face incidents involving auto, property or liability insurance:

• Demanding cash up front
• Padding loss or injury claims to get a larger payout
• Pressuring policyholders to sign over their insurance benefits
• Overcharging for services with the rationale of “insurance will cover it”

In each of these schemes, the pattern and result are the same: fraudsters profit while consumers and insurers bear the cost.

Common Insurance Fraud Scenarios

Real-world examples of common fraud include:

• In the aftermath of storms, wildfires and earthquakes fraudulent contractors may arrive unsolicited at the doorstep of their targets, attempting to reap their victims’ insurance benefits by offering promises of work that they never intend to complete.
• In medical clinics and doctors’ offices, fraud can take the form of pressure to visit certain medical professionals who may be taking part in an organized mill, unnecessary prescriptions and being billed for services that were not rendered.
• After vehicle collisions, unsolicited, predatory towers swoop in, sometimes without licenses, to sign panicked motorists up for a towing job, leaving them on the hook for overinflated charges.

Suspected insurance fraud or and instances of fraud should be reported to law enforcement and the state’s Department of Insurance through the National Association of Insurance Commissioners at Those who suspect they are victims of fraud or have been targeted by fraudulent activity should contact their insurance company immediately to report suspected fraud attempts.

Consumers can also call NICB’s toll-free hotline at 800-TEL-NICB (800-835-6422).

Topics
Fraud