What is Insurance Fraud?

insurance fraud

health insurance fraud

Insurance fraud is when someone tries to gain certain benefits form an insurance provider by lying and giving false information. Ever since insurance became a commercial enterprise, fraud has been taking place costing insurance companies billions of dollars each year.

The severity of such fraud varies from claims that have been slightly exaggerated to those where accidents and damage has been cause on purpose. Fraud is one of the reasons that premiums on insurance tend to be higher. Besides this negative effect, they also pose a threat to innocent people in the form of purposeful injury or accident. 

insurance policy

The main trigger for insurance fraud is the inherent financial gain. These contracts with insurance companies and providers present opportunities that can be exploited by the insurance holder and the insurer. Causes cannot be generalized and can vary but it is mainly greed and lack of a system in place to recognize this fraud taking place.

Most of the time, those who are committing insurance fraud will see it as a crime that they can get away with easily – even if they get caught. Court sentences for this crime are not very harsh, hence people try to take advantage of this. This is why people with malicious intent will try to trick the system as they might feel it is more profitable than selling drugs on the streets.

auto insurance policy

Another common area for fraud is that of property insurance. Often, the insurance amount paid will be more than what the property insured is actually worth. In this case, the insurance holder might destroy the property on purpose for the amount they will receive from the insurance company will be much more. This problem is difficult to combat as insurance companies might encourage this to earn a profit.

The governments of several countries as well as insurance companies have some measures in place in order to try to fight insurance fraud to stop scammers from taking advantage of the system.