s

Frau
d:
why
shoul
d I
worry?
Watch out... Insurance crooks are picking your pocket to line theirs. These thieves are committing
insurance fraud, one of America's largest crimes.
Insurance fraud occurs every day, and in every state. People of all races, incomes and ages are
victimized. Insurance schemes steal at least $80 billion a year, the Coalition Against Insurance
Fraud estimates.
But look beyond the high-dollar costs... Honest, hard-working consumers and businesses pay a
steep price. Lives, businesses, careers and families are damaged or even ruined by insurance fraud
crimes.
People lose their savings. Trusting citizens are bilked out of thousands of dollars, often their entire
life savings, by insurance investment schemes. The elderly are especially vulnerable.
Health is endangered. People's health and lives are endangered by swindlers who sell nonexistent
health policies or perform quack medical care to illegally inflate health insurance claims.
Premiums stay high. Auto and homeowner insurance prices stay high because insurance
companies must pass the large costs of insurance fraud to policyholders.
Consumer goods cost more. Prices of goods at your department or grocery store keep rising when
businesses pass higher costs of their health and commercial insurance onto customers.
Honest businesses lose money. Businesses lose millions in income annually because fraud
increases their costs for employee health coverage and business insurance.
Innocent people are killed and maimed. People die from insurance schemes such as staged auto
accidents and arson including children and entire families. People and even animals also are
murdered for life insurance money.
Employees lose jobs. People lose jobs, careers and health coverage when insurance companies
go bankrupt after being looted by fraud thieves.

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How to Report Insurance
Fraud
There are two different motivations behind wanting to know how to report
insurance fraud. The first is if you are wanting to turn an insurance company in
for an act of fraud against consumers. The other is if you are turning in a
consumer for fraudulent action or concerns against an insurance company or
government insuring organization. Each has its own reporting method that you
should familiarize yourself with before considering lodging a complaint.
1.
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1
Understand why reporting insurance fraud is important to you.
There are many examples of insurance fraud. Some of these include claiming that your
house was burglarized and turning in false claims about stolen items, doctors who bill
for insurance services that were not provided, or a worker collecting workman's
compensation while that person is employed or working. When people practice
fraudulent behavior it drives up consumer premium costs, which in turn makes
insurance more costly to you.

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2
Report fraudulent behavior to your state's Insurance Frauds Bureau.
Most sites will have instructions and/or a report form that you can complete.
Sites like these are also applicable if you feel that an insurance company is fraudulently
treating a consumer. Without someone stepping forward to report abuse, issues like
this would not get resolved.
The Coalition Against Insurance Fraud has a guide to reporting insurance fraud
depending on the type of fraud and where you live:
http://www.insurancefraud.org/report-fraud.htm
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2.
3
Contact the specific insurance company's fraud hotline if one is available. If not, call or write
the company to report fraudulent behavior. Most insurance companies have their own special
investigation unit who will look into every fraud claim that comes across their desk.
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3.
4
Use the toll-free National Insurance Crime Bureau hotline at 1-800-835-6422 to report
fraudulent activity. This organization was created by members of the insurance industry to
curtail fraudulent activity.
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4.
5
Report medical professionals suspected of insurance fraud to your state medical board or
chiropractic board.
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5.
6
Turn in social security fraud perpetrators by calling the Social Security Office of the Inspector
General at 1-800-269-0271, contacting them online via their website at
http://www.ssa.gov/oig/guidelin.htm, or by mail.
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6.
7
Contact the U.S. Department of Agriculture if you suspect that someone is actively taking part in
crop fraud, waste or abuse of the federal crop insurance program.
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7.
8
When you turn in a complaint be prepared to give full details including name, date,
organization involved, amount of money that you think was lost, documents or written
material as well as any other documentation that you think might help.





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Fraud indicators
No two claims are ever the same, but
features that are commonly present in
fraudulent casualty claims include:
The accident is witnessed and
Corroborated by a close friend, colleague
or family member
There is a delay in reporting the incident
There are discrepancies between the
claimants account of the incident, those
of witnesses, the pleaded allegations, or
accounts contained in other sources of
evidence such as hospital records
There is no record of medical treatment,
or there is a delay in seeking treatment
The individual claimant is disgruntled in
some way. For example, is or has been
subject to disciplinary action, or is at risk
of redundancy
The claimant or witnesses are repeat
claimants
There is an unusually short delay
between the accident and the letter of
claim.
Wherever more than one of the above
exists, a more detailed level of scrutiny and
investigation will be required to determine
whether the claim is fraudulent or contains
spurious elements.

HINTS
1. Front company will often not show a physical address.
2. Company or individual may be difficult to contact and will
quite often use cellular numbers or transfer calls.
3. Payments may appear to have been transacted on accounts
with different names or locations differing from that as
indicated on the invoice.
4. Problems quite often in making physical contact other than
through the suspected agent/broker/vendor.
5. In cases where a service is actually provided, actual provider
may be a different company than that listed on the invoice.

What is the scale and impact of fraud?
The extent of insurance fraud varies between countries. Detected and undetected
fraud is estimated to represent up to 10% of all claims expenditure in Europe. This
figure varies between countries and classes of insurance due to a number of factors,
such as how the market functions or the local prevalence of one type of insurance.
The approach to identifying insurance fraud also differs between European countries.
In some countries, importance is placed on establishing an accurate estimate of
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detected and undetected fraud, while other countries place little emphasis on this
distinction, choosing instead to focus on reducing the amount of known fraud.
Nevertheless, the aim remains the same: to establish the extent to which current
counter-fraud initiatives are successful and whether further initiatives are required.
Several markets collect precise data on the prevalence of fraud. For example:
Germany
A study conducted by the insurance association (GDV) concluded that more
than half of all claims arising from loss or damage to smartphones or tablet PCs
could not have arisen and therefore must have been fraudulent to some extent.
UK
Figures from the Association of British Insurers (ABI) show that:
Despite insurers detecting more fraud, it is estimated that around
1.9bn (2.2bn) of fraud goes undetected each year.
I nsurers are detecting more fraud the value of detected fraud in
2011 rose 7% to 983m (1 148m) from 919m in 2010.
I n 2011 insurers uncovered 138 814 fraudulent insurance claims
equivalent to 2 670 claims every week up 5% on 2010.
The value of savings for honest customers from detected frauds
represented 5.7% of all claims, compared to 5% in 2010.
10
Sweden
Figures from Insurance Sweden (Larmtjnst) reveal that:
Insurance fraud investigators, established by insurance companies,
conducted 6 200 investigations into suspected fraud in 2011 and
detected a total of 40m of fraud.
A study found that 1020% of all fraudulent claims are claims for losses
arising from events that never occurred (ie untruthful claims) and 80
90% of all fraudulent claims are exaggerated claims.
Also in Sweden, a serious problem was identified with vehicle arson. In the
autumn of 2012 there was at least one car fire per day in the south of the
country, with most of the cars over 10 years old and many only owned for less
than three months. The cars were being purchased cheaply at online auctions
and then registered to and insured with fictitious owners. The damage claims
were for compensation significantly higher than the purchase value of the
vehicle.
France
Figures from the insurance association (FFSA) reveal that 35 042 fraudulent
insurance claims were recorded in 2011, leading to 168m not being paid out
to dishonest individuals.
Finland
A study of 1 000 adults conducted by the insurance association (FFI) in 2012
found that 27% said they knew a person who has deceived his/her insurance
company. This figure is up from 25% in a similar study in 2010.
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The impact of insurance
fraud
Many states have enacted victims rights laws that allow victims to make a statement in court
either during a trial or at sentencing. All victims of insurance fraud are encouraged to take
advantage of this opportunity to spread the word to judges, juries and others in the courtroom
including the news media about the nature and severity of this crime. Below are facts and figures
that can be woven into a personal statement of how fraud has affected you and/or your company.
Insurance fraud is a major crime that imposes significant financial and personal costs on individuals,
businesses, government and society as a whole. Fraud is widespread and growing. Insurance
swindles victimize people from virtually every race, income, age, education level and region of the
U.S.
At one level, insurance fraud is an economic crime costing individuals, business and government
billions of dollars a year. But fraud also is a violent crime that can involve murder, personal injury
and serious property damage. Insurance fraud also imposes other personal costs such as disrupted
lives and families, humiliation and depression, lost jobs and bankruptcy.
Overall financial cost
Nearly $80 billion in fraudulent claims are made annually in the U.S., the Coalition Against Insurance
Fraud estimates. This figure includes all lines of insurance. Its also a conservative figure because
much insurance fraud goes undetected and unreported.

Higher insurance premiums
Fraud contributes to higher insurance premiums because insurance companies generally must pass
the costs of bogus claims and of fighting fraud onto policyholders. This contributes to a
premium spiral that can price essential insurance coverage, often required by state law, beyond the
reach of many consumers and businesses. For example:
Auto insurance. False injury claims involving deliberately staged car accidents, for example, are a
major reason auto insurance premiums in New York, Florida and New Jersey are among the nations
highest.
Workers compensation. Workers compensation premiums are rapidly rising rapidly, in part
because of fake injury claims by employees and fraud by some employers to lower their premiums.
Many smaller businesses, especially, report that workers compensation insurance is increasingly
unaffordable.

Rising cost of goods & services
Businesses must pass the cost of rising insurance premiums onto their customers by raising prices
for goods and services. Many larger corporations also spend millions of dollars a year for
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investigation and fraud-prevention programs that aim. This cost also is reflected in higher prices of
products and services.

Jeopardize health, lives and property
Peoples health, lives and property are often endangered by insurance fraud schemes. Here are
several examples:
Staged auto accidents. Innocent motorists lives are jeopardized when they are maneuvered into
car crashes staged by crime rings to collect large payouts from auto insurers. One family of three
was burned to death when a staged accident went awry after their car was hit by two large trucks at
high speeds on a California freeway.
Murder for life insurance. A common life-insurance scheme involves murdering a spouse, relative
or business associate to collect on the victims life insurance policy, which often is worth $100,000 or
more.
Health insurance swindles. The safety of people is jeopardized when they unknowingly buy fake
health insurance. In addition to having their premium money stolen, policyholders needing
chemotherapy and organ transplants have had to pay for life-saving medical treatment themselves
when they discovered their insurance was fake. In other health schemes, medical providers often
perform potentially dangerous and unneeded surgery on healthy people solely to increase their
insurance billings. In many cases, the victims are elderly, poor and homeless.
Arson. Homes and businesses often are burned down for insurance money. The lives of
firefighters, family members and nearby residents also are placed at risk. Numerous people have
died or been seriously injured in arson-for-profit fires. Also, the property damage is often magnified
because arson fires frequently spread to nearby dwellings.

Lost personal income, savings
Many insurance fraud schemes steal money directly from policyholders. The varied schemes can
cost people from a few dollars to their entire life savings. Here are several examples:
Phony health coverage. Several hundred thousand people, for example, have unknowingly
purchased phony health coverage. They lost the premium money they paid, but many also faced
catastrophic losses when they became ill and had to pay large medical bills themselves because
their policy was worthless. Some people incurred hundreds of thousands of dollars in personal debt.
Fraudulent viaticals. Thousands of people also have lost money to viaticals, a quasi-insurance
product where people invest in the life-insurance policies of dying people. Viaticals can be legitimate,
but many people have lost large investments in fraudulent viaticals. Some have lost their life
savings.
Dishonest agents. Dishonest insurance agents will pocket client insurance premium checks
themselves, leaving the clients dangerously uncovered. Dishonest insurance agents also increase a
policyholders premiums by secretly adding unwanted coverage to clients policies. Agents often
target the elderly with these swindles.
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Ruined credit
Many seriously ill people who purchased phony health insurance found their credit ruined when they
couldnt pay large medical bills after their policy refused to pay.

Lost jobs
Some fraud schemes can cost people their jobs. Convicted swindler Martin Frankel gained control of
a small life insurance company called Franklin American and secretly siphoned the companys
assets into his own accounts. This sent the company into bankruptcy, costing hundreds of
employees their jobs.

Diverts government resources
Fighting insurance fraud is a major expense for federal, state and local governments. This dilutes the
nations overall anti-crime efforts by diverting often-limited government resources needed to fight
other crimes. Here are several examples of this:
State fraud bureaus. States conduct extensive anti-fraud programs, funded by taxpayers and
insurance companies. Most states, for example, have insurance fraud agencies that investigate
suspected swindles and refer cases for potential prosecution.
Police and other law enforcement. State, local and federal law enforcement all are involved in
investigating insurance-fraud cases, often jointly.
Prosecutions. Taxpayer funded prosecutors devote considerable time and resources to pursuing
fraud cases in court, many of which are complex and require extensive time to build viable cases.
Federal government. The federal government annually allocates several billion dollars to fighting
fraud in Medicare and Medicaid, the respective public health insurance programs for the elderly and
poor.

Personal costs
Insurance fraud also can impose large personal costs on its victims. Many victims feel embarrassed,
humiliated and even violated. Often their lives and families also are disrupted for long periods of
time. Many must recover from serious financial losses or fraud-related physical injuries. Victims also
may have to recover or replace property that was stolen, damaged or destroyed by schemes. Many
victims also must spend considerable assisting law enforcement and prosecutors as material
witnesses.
Diverts from essential services
Federal and state government fraud-fighting efforts costs taxpayers billions of dollars a year, thus
diverting scarce tax money from other essential public services. Fraud against taxpayer-funded
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health programs such as Medicare and Medicaid diverts that money from meeting the health needs
of Americas the elderly and poor.

Case study
42/3
policyholder forges documents in the course of making a valid
claim insurers wrongly attempt to "avoid" entire policy
Mr H was a self-employed plumber. In January, his home was burgled and he made a claim
under his home insurance policy, which the firm duly paid. In May, his van was broken into
and a number of personal possessions were stolen, including the tools he used for his work.
He made another claim to the firm under the personal possessions section of his home
contents policy.
During the course of its enquiries, the firms loss adjusters insisted that Mr H substantiate
all his losses with original purchase receipts. Mr H was unable to find all the receipts, so he
asked a friend to fake one for him.
When the firm discovered the forged receipt, it "avoided" the policy in other words,
cancelled it from the start. The firm not only refused to pay for the items stolen from the
van, it also tried to recover the money it had previously paid out to Mr H for his earlier
burglary claim. After complaining unsuccessfully to the firm, Mr H came to us.
complaint upheld
The firm accepted that the theft from the van was genuine. Mr H had been foolish to obtain
a forged receipt but he was not dishonestly trying to obtain something to which he was not
entitled. The loss adjusters had, in fact, been rather overzealous in insisting on strict proof
of purchase for all the items stolen.
We applied the rationale of "The Mercandian Continent" case (reported in [2001] Volume 2
of the Lloyds Law reports at page 563) which concerned the principle of "utmost good
faith". Ultimately, the case held that insurers should only be able to "avoid" a policy for
fraud where the insurers ultimate liability was affected, or when the fraud was so serious it
enabled the insurer to repudiate the policy for fundamental breach of contract.
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Following this rationale, we concluded that the fair and reasonable solution was for the
insurer to reinstate the policy and pay the claim. In any event, it was unlikely that the firms
ultimate liability would be affected by the fraud, as Mr Hs work tools were specifically
excluded from the home policy. Home policies often exclude cover for contents or
possessions that are for business rather than personal use.
We also pointed out to the firm that even if Mr H had been guilty of fraud, it would only
have been entitled to "forfeit" the policy from the date of the current claim, leaving the
earlier burglary claim intact. It was not entitled to recover previous payments for valid
claims.
21/4
motor - proof of purchase - cash purchase - lack of substantiation
- conflicting information - whether claim valid.
Miss D insured her campervan in June 2000. A few weeks later, on 12 July, she went on
holiday to Grenada. When she returned on 28 August, she reported the campervan missing,
presumed stolen. It was never found.
When the firm questioned her about the claim, Miss D said she had bought the campervan
on 10 May 2000 and had paid 9,700 in cash. She said it had been advertised for sale in a
newspaper and that she and a friend, Mr W, arranged to meet the seller in a pub. She said
she had bought the campervan on the spot and had driven it home. She later explained that
most of the cash for the campervan had come from the sale of her previous car for 6,250
some six months earlier. She said she had kept that cash in her flat until she bought the
campervan. She could not explain how she obtained the balance of 3,450.
The firm was unable to contact Mr W, any of his neighbours, or the previous owner of the
campervan. It discovered that the dealer to whom Miss D claimed to have sold her car did
not exist. A jeweller had been operating for the last six years from the address she gave as
the car dealer's. The firm also found that the campervan had been written off in 1990.
complaint rejected
It is not normally the business of a firm to investigate how a policyholder has financed the
purchase of a vehicle. But it is legitimate for the firm to make enquiries when there is doubt
about the vehicle's ownership. No one else beside Miss D had claimed to own the vehicle,
but there were many conflicting details in the case and Miss D was unable to explain them.
The firm was therefore justified in refusing to pay the claim.
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21/1
household contents - exaggerated claim - whether insurer
entitled to reject claim in full - whether policyholder pressed to
disclaim part of loss.
When Mr J was burgled, he notified the police and put in a claim to the firm. His claim -
totalling 3,000 - included a DVD player, 14 DVD discs, other audio-visual equipment and
jewellery.
When the firm questioned Mr J, it emerged that although he initially said that he had bought
one of the stolen items (a hi-fi) for 150, he had actually bought it from his brother for 60.
The firm's investigator noticed that some of the DVDs he had listed in his claim had not yet
been released in the UK. Mr J was unable to explain how he had bought them. He then
admitted he had never owned a DVD player or discs, and he said he wished to withdraw
that part of his claim.
The firm rejected Mr J's claim, citing the policy exclusion that enables it to do this if any part
of a claim is false or exaggerated.
Mr J's solicitor then said that Mr J had been told by the firm's investigator that if he said
that he had never owned a DVD player, the rest of the claim would be paid more quickly.
The solicitor also said that Mr J had reported the theft of the DVD player to the police and
this proved it was a valid claim.
complaint rejected
We were unable to reconcile Mr J's statement with his solicitor's assertions. It was hard to
believe that, merely to progress payment for the rest of his claim, Mr J was willing to admit
he had claimed for something he did not own. The only logical explanation was that Mr J
had deliberately exaggerated his loss. So the firm was entitled to refuse to make any
payment.



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PENALTIES

Insurance Companies Hire Private Investigators to Catch Cheaters!
If you are thinking about committing insurance fraud by cheating the system, think again. Not
only is it dishonest and bad for your conscience, the outcome of your dishonesty can have
dramatic ripple effects.
One of the smallest ripples, not that it makes it better for those of us paying the difference,
occurs in insurance premiums. American families spend $950 extra per year to cover losses
caused by fraudulent claims. That's more than many Americans' monthly mortgage payments.
Now why would you want to go and do that to the rest of us?
If - and when - you get busted by an insurance investigator, hired by a suspiscious claims
investigator, you will suffer severe penalties. Obviously all that glorious money, and any of the
luxurious assets you have acquired in the afterglow of the insurance benefit, will go bye-
bye. And if you don't have the money, andor the assets you've accumulated don't pay the total
bill, you will owe the insurance agency the difference. This can mean garnished wages and tax
returns for the rest of your life, depending on the amount of the claim.
You will almost always have to do jail time. Penalties for committing insurance fraud vary from
state to state, depending on the type of fraud committed and the dollar amount involved. In my
state, The California Department of Insurance states loud and clear that, "Insurance fraud is a
felony." So there's that.
Your future employment options begin to look pretty bleak. Surprising as it may be, most
employers want to avoid hiring liars and thieves. Background checks, criminal records, and
personal references can easily uncover your devious past exploits. Getting a job with a criminal
record is not impossible, but if an employer knows you committed insurance fraud in the past,
s/he is probably going to pass your application over to the "round file".
You'll have to live with yourself, your family, and your friends. What an embarrassing existence
that will be. If you were one of those individuals who won a large settlement, your fall will be
that much more painful. Middle America starts looking pretty good when you are staring at life
from the bottom of the humility barrel.
Don't let insurance fraud be the way you wind up at the other end of a private investigator's
surveillance operation. Don't be a part of an insurance investigation. It pays to have integrity!
What Is the Punishment
for Fraud?
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Answer

The punishment for fraud depends on the severity of the crime. The offense is regarded very
serious and can land you in jail for periods between 3 and 15 years. Fines can also be imposed to
a maximum of 100,000.
Examples[edit]
Examples of soft auto-insurance fraud can include filing more than one claim for a single injury,
filing claims for injuries not related to an automobile accident, misreporting wage losses due to
injuries, or reporting higher costs for car repairs than those that were actually paid. Hard auto-
insurance fraud can include activities such as staging automobile collisions, filing claims when
the claimant was not actually involved in the accident, submitting claims for medical treatments
that were not received, or inventing injuries.
[30]
Hard fraud can also occur when claimants falsely
report their vehicle as stolen. Soft fraud accounts for the majority of fraudulent auto-insurance
claims.
[26]

Another example is that a person may illegally register their car to a location that would net them
cheaper insurance rates than where they actually live, sometimes called "rate evasion". For
example, some drivers in Brooklyn drive with Pennsylvania license plates because registering
their car in a rural part of Pennsylvania will cost a lot less than registering it in Brooklyn.
Another form of automobile insurance fraud, known as "fronting," involves registering someone
other than the real primary driver of a car as the primary driver of the car. For example, parents
might list themselves as the primary driver of their children's vehicles to avoid young driver
premiums.
"Crash for cash" scams may involve random unaware strangers, set to appear as the perpetrators
of the orchestrated crashes.
[31]
Such techniques are the classic rear-end shunt (the driver in front
suddenly slams on the brakes, possibly with brake lights disabled), the decoy rear-end shunt
(when following one car, another one pulls in front of it, causing it to brake sharply, then the first
car drives off) or the helpful wave shunt (the driver is waved into a line of queuing traffic by the
scammer who promptly crashes, then denies waving).
[32]

Organized crime rings can also be involved in auto-insurance fraud, sometimes carrying out
schemes that are very complex. An example of one such ploy is given by Ken Dornstein, author
of Accidentally, on Purpose: The Making of a Personal Injury Underworld in America. In this
scheme, known as a swoop-and-squat, one or more drivers in swoop cars force an
unsuspecting driver into position behind a squat car. This squat car, which is usually filled
with several passengers, then slows abruptly, forcing the driver of the chosen car to collide with
the squat car. The passengers in the squat car then file a claim with the other drivers insurance
company. This claim often includes bills for medical treatments that were not necessary or not
received.
[33]

An incident that took place on Golden State Freeway June 17, 1992, brought public attention to
the existence of organized crime rings that stage auto accidents for insurance fraud. These
schemes generally consist of three different levels. At the top, there are the professionals
doctors or lawyers who diagnose false injuries and/or file fraudulent claims and these earn the
bulk of the profits from the fraud. Next are the "capper (insurance fraud)s" or "runners", the
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middlemen who obtain the cars to crash, farm out the claims to the professionals at the top, and
recruit participants. These participants at the bottom-rung of the scheme are desperate people
(poor immigrants or others in need of quick cash) who are paid around $1000 USD to place their
bodies in the paths of cars and trucks, playing a kind of Russian roulette with their lives and
those of unsuspecting motorists around them. According to investigators, cappers usually hire
within their own ethnic groups. What makes busting these staged-accident crime rings difficult is
how quickly they move into jurisdictions with lesser enforcement, after a crackdown in a
particular region. As a result, in the US several levels of police and the insurance industry have
cooperated in forming task forces and sharing databases to track claim histories.
[34][35]

In the United Kingdom, there is an increasing incidence of false whiplash claims to car insurance
companies from motorists involved in minor car accidents (for instance; a shunt). Because the
mechanism of injury is not fully understood, A&E doctors have to rely on a patient's external
symptoms (which are easy to fake). Resultingly, "no win no fee" personal injury solicitors
exploit this "loophole" for easy compensation money (often a 2500 payout). Ultimately this has
resulted in increased motor insurance premiums, which has had the knock-on effect of pricing
younger drivers off the road.
In Russia, the driving conditions and roads are dangerous with many people trying to scam
drivers by jumping in front of expensive-looking cars or crashing into them. Hit and runs are
very common and insurance companies notoriously specialize in denying claims. Two-way
insurance coverage is very expensive and almost completely unavailable for vehicles over ten
years oldthe drivers can only obtain basic liability. Because Russian courts do not like using
verbal claims, most people have dashboard cameras installed to warn would-be perpetrators or
provide evidence for/against claims.
[28][repetition]




Causes[edit]
The chief motive in all insurance crimes is financial profit.
[2]
Insurance contracts provide both
the insured and the insurer with opportunities for exploitation.
According to the Coalition Against Insurance Fraud, the causes vary, but are usually centered on
greed and holes in the fraud fight.
[3]
Often, those who commit insurance fraud view it as a low-
risk, lucrative enterprise. Drug dealers who have entered insurance fraud
[4]
think its safer and
more profitable than working street corners. Compared to other crimes, court sentences for
insurance fraud can be lenient, so scammers may try to take advantage of the system. Though
insurers try to fight fraud, some will pay suspicious claims, since settling such claims is often
cheaper than legal action.
Another reason that this opportunity arises is in the case of over-insurance, when the amount
insured is greater than the actual value of the property insured.
[2]
This condition can be very
difficult to avoid, especially since an insurance provider might sometimes encourage it in order
to obtain greater profits.
[2]
This allows fraudsters to make profits by destroying their property
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because the payment they receive from their insurers is of greater value than the property they
destroy.
Insurance companies are also susceptible to fraud because false insurance claims can be made to
appear like ordinary claims. This allows fraudsters to file claims for damages that never
occurred, and so obtain payment with little or no initial cost.
The most common form of insurance fraud is inflating of loss.
Losses due to insurance fraud[edit]
It is hard to determine the exact value for the amount of money stolen through insurance fraud.
Insurance fraud is designed by fraudsters to be undetectable, unlike visible crimes such as
robbery or murder. As such, the number of cases of insurance fraud that are detected is much
lower than the number of acts that are actually committed.
[2]
The best that can be done is to
provide an estimate for the losses that insurers suffer due to insurance fraud. The Coalition
Against Insurance Fraud estimates that in 2006 a total of about $80 billion was lost in the United
States due to insurance fraud.
[5]
According to estimates by the Insurance Information Institute,
insurance fraud accounts for about 10 percent of the property/casualty insurance industrys
incurred losses and loss adjustment expenses.
[6]
The National Health Care Anti-Fraud
Association estimates that 3% of the health care industrys expenditures in the United States are
due to fraudulent activities, amounting to a cost of about $51 billion.
[7]
Other estimates attribute
as much as 10% of the total healthcare spending in the United States to fraudabout $115
billion annually.
[8]
Another study of all types of fraud committed in the United States insurance
institutions (property-and-casualty, business liability, healthcare, social security, etc.)put the true
cost at 33% to 38% of the total cash flow through the system. This study resulted in the book title
"The Trillion Dollar Insurance Crook" by J.E. Smith. In the United Kingdom, the Insurance
Fraud Bureau estimates that the loss due to insurance fraud in the United Kingdom is about 1.5
billion ($3.08 billion), causing a 5% increase in insurance premiums.
[9]
The Insurance Bureau of
Canada estimates that personal injury fraud in Canada costs about C$500 million annually.
[10]

Indiaforensic Center of Studies estimates that Insurance frauds in India costs about $6.25 billion
annually.
[11]

10 Most Common Types
of Insurance Fraud
by Staff Writer
Insurance fraud is not a victimless crime. When people cheat insurance companies out of money,
the honest people that pay premiums pay through increased insurance costs. Insurance
companies lose an estimated $30 billion per year in insurance fraud costs that have to get passed
on to bill-paying consumers.
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You can help stop insurance fraud by contacting your state department of insurance and giving
as many details as you possibly can about the fraud that you witnessed. Consumers should learn
to be vigilant in identifying insurance fraud by becoming familiar with the 10 most common
forms of fraud.
1. Stolen Car
There are two ways that criminals perpetrate the stolen car insurance fraud scam. The
first type of stolen car fraud is when a car owner sells his car to a body shop to be cut up
for parts and then reports the car as stolen. The body shop is in on the fraud, so the
authorities are never told about the sale for parts.
The second most common way that criminals commit stolen car fraud is to sell the car to
an overseas buyer, make the transaction without any paperwork, ship the car overseas and
then report it stolen.
2. Car Accident
The next time you see a car accident, you could be watching insurance fraud in action. In
most cases, the driver and accident victim are the only ones in on the scheme. In other
cases, the driver, victim, insurance investigators and even some of the bystanders that
give statements are in on the fraud. The value of the vehicles is greatly inflated and the
insurance payoff is for two totaled vehicles.
3. Car Damage
Any form of insurance fraud is illegal and damaging to the insurance company. Some
people will report a small car accident, get an estimate for damages, collect the insurance
check and then not get the car fixed. This is single most common form of auto insurance
fraud going on, and it happens constantly. The people doing it see no harm in it, but the
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money the insurance company pays out comes from premiums paid by other customers,
which will go up the more often this fraud is committed.
4. Health Insurance Billing Fraud
Unfortunately, health care professionals will sometimes get in on the insurance fraud act.
One form of <a href=http://www.cigna.com/report-health-insurance-fraud>health
insurance fraud</a> is for health care providers to bill health insurance companies a
high fee for a standard procedure, or to bill for services that were never rendered.
For example, you may go in for a regular check-up but your doctor decides to bill your
insurance company for an in-office surgical procedure that never happened. The patient is
the victim of fraud and does not even know it.
5. Unnecessary Medical Procedures
If it seems like your doctor is ordering you to go for unnecessary testing, then you may be
the victim of insurance fraud. If you go to the doctor for a sore arm but your doctor
orders a series of blood tests that have nothing to do with your arm, then that could be a
common form of insurance fraud.
6. Staged Home Fires
Homeowners insurance fraud costs insurance companies and their customers billions of
dollars each year. One of the most common form of homeowners insurance fraud is the
staged fire or act of vandalism. This can be done in one of two ways. The homeowner
either removes important family items before the fraud takes place, or the homeowner
makes sure that the insurance company knows the value of the expensive items and then
has them destroyed.
In almost every case of a staged home fire, the homeowner is not home and can account
for his whereabouts when the event took place. Criminals are hired to set fire to the
home, or break in and vandalize the home to make it look like the homeowner was
victimized.
7. Storm Fraud
Criminals will take advantage of any situation to commit insurance fraud, including a
major storm. A common form of fraud that happens in the wake of major storms is
homeowners will either enhance the storm damage to their home to get more of a
settlement, or the homeowner will take advantage of how busy the insurance company is
and call in a claim even if there was no storm damage.
8. Abandoned House Fire
One of the most common forms of homeowners insurance fraud is the abandoned house
fire. It can happen for a variety of reasons, but the end result is always fraud. The
homeowner could have been transferred to a different city because of his job and cannot
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sell his property, or a landlord owns a home in a neighborhood that is no longer popular
and cannot get tenants to help pay the mortgage.
If you have ever been at the scene of an abandoned house fire after the flames have been
put out, you will see at least one fire inspector for the insurance company on site. This is
an extremely common kind of insurance fraud that not only causes premiums to go up,
but it also puts the buildings next to the abandoned home in jeopardy as well.
9. Faked Death
This form of insurance fraud is so common that it has been the plot of many movies,
television shows and books. A criminal will take out a life insurance policy on himself
and make his spouse the beneficiary. After the policy has been in effect for several
months, the insured criminal fakes his death and his spouse is paid the death benefit.
When the funeral is over, the spouse suddenly disappears and the insurance company is
out the death benefit.
10. Renters Insurance
People who rent homes or apartments will often take out inexpensive renters insurance
policies to cover the cost of their possessions. Prior to moving out of the home or
apartment or when financial times get bad, the insured will sell their possessions and then
report them stolen to collect the insurance money.
Insurance fraud affects everyone in some form or another. When your auto insurance premiums
go up, that is partly due to insurance fraud. If you know of insurance fraud that has been
committed, then you should report it to your state department of insurance immediately.



White Lies That Lead to Insurance Fraud
Posted on September 25, 2013 by Scott Biscoe
Insurance fraud is a serious offense that has a ripple effect of repercussions across the entire
economy. Some estimates put the annual cost of insurance fraud at $80 billion. When people think of
insurance fraud usually its the big things that come to mind staging a car accident, faking an
injury, exaggerating an insurance claim, etc. But the truth is many people commit smaller incidences
of insurance fraud every day. You may have even done it yourself on accident.
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Here are the white lies that can get you in insurance fraud hot water.
Home, Condo and Renters Insurance
Rounding up the value of items rather than researching the correct estimate.
Not disclosing something you think may be defective before opening the policy.
Claiming roommates items as your own on renters insurance.
Failing to mention that you have a home office or conduct business in your home.
Failing to mention that the home is a rental, not a primary residence.
Claiming loss on an item that was already damaged or missing.
Motorcycle and Auto Insurance
Low balling the mileage of a car or motorcycle.
Low balling the amount of miles you drive in a day.
Keeping a vehicle registered in an area with lower rates even after you move.
Overestimating how much a commercial vehicle is used for personal use.
Overestimating how much is lost in wages due to an injury sustained in an accident.
Getting excessive treatment, like massage therapy, for a car accident injury.
Telling the insurer that no one else drives your car when in actuality others do.
Life Insurance
Lying about your weight. Its personal information you may fib about to friends, but the life
insurance company needs to know the real number.
Forgetting to mention that you occasionally smoke or did in the past.
Low balling the amount of drinks you have in a given week.
Leaving out a prescription drug on the application even one thats taken for non-life threatening
reasons.
Not being upfront about your past driving offenses.
Downplaying your adventure seeking side that regularly takes you to exotic locales and gets you
into extreme sports.
Sometimes people unknowingly provide the wrong information. When youre establishing a policy
you may have to guesstimate some information, which may not always end up being accurate. Later
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down the road if you find that youve accidentally provided incorrect information dont sweat it.
Contact your insurer so you can get things updated and on the level.
Whether its a little white lie or a big fat one they are all the same, and all of them can be considered
insurance fraud. If you dont tell your insurance company the whole truth it can leave you in a
vulnerable position and possibly disqualify you from coverage. When it comes to insurance honesty
is always the best policy.


http://doj.nh.gov/consumer/insurance-fraud/faq.htm
The penalties for insurance fraud vary widely depending on the state where the prosecution occurred, the amount of
money fraudulently sought or obtained, and the criminal history of the defendant.
Insurance fraud can generally be divided into two categories, known in the industry as soft fraud and hard fraud.
Soft fraud occurs when a person exaggerates an existing claim, such as overstating the damages caused by a
car accident. Soft fraud is usually considered a misdemeanor, punishable by fines, jail time of up to one year,
community service, and probation.
Hard fraud, on the other hand, occurs when a person either causes or fabricates a loss for the deliberate
purpose of obtaining insurance payments. Hard fraud is almost considered a felony, punishable by strict
penalties including the possibility of incarceration in state prison for a number of years.

Thousands Of Villagers Duped Of Lakhs In Insurance Fraud
Posted on December 27, 2013 by P Kumar

Over 7,000 residents of number of villagers in the Naraingarh segment of the Ambala district
have become victims of an insurance fraud in which they continued to pay the premium for three
years, only to realize recently that the premium never reached the concerned company.
A team of four employees of the Chandigarh office of Life Insurance Corporation of India (LIC)
approached the Anganwari and ASHA workers in the villages in 2008 and asked them to rope in
the villagers living below the poverty line to pay the premium of Rs 100, Rs 200 and Rs 500 and
get an insurance cover under the companys micro insurance scheme. The Anganwari and ASHA
workers were promised a 5% share of the total policies sold through them.
Moved by the attractive offer, a large number of villagers bought the policy for which they
started paying a monthly premium, which was collected by the workers in their respective
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villages on behalf of the LIC agents. The agents would then collect the premium and even issued
receipts of the same amount.
The practice continued for more than four years, without the villagers or the insurance company
realizing that in actual the money collected was being pocketed by the agents who visited the
villages each month.
The matter came to light when villagers received letters from the insurance company, asking
them to pay their premiums for the last three years to revive their policy, which had been
suspended by the company for non-payment of premiums. The villagers then approached the
Naraingarh office of the LIC, from where it was confirmed that one Sandeep, a resident of
Nabha, had been collecting the premium from the villagers on behalf of the company.
Meanwhile, the villagers alleged that the monthly collection was in lakhs and the fraud could be
to the tune of crores of rupees. The villagers said that they would be meeting the officials at the
Chandigarh office to demand a refund of the cash that had been collected from them.

Collective Actions Needed to Curb Frauds in Health Insurance
Posted on December 11, 2012 by Akanksha
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For the health insurance industry, the growing number of fraud cases at various stages has
become a major concern and unless collective actions are taken, they may take serious
proportions in the coming years.
Increase in frauds indirectly drives the premium collected from policyholders as insurers
ultimately recover the losses by increasing the prices.
Some of the common frauds by the customers of health insurance relate to concealing pre-
existing diseases or chronic ailments, manipulating pre-policy health check-up findings,
duplicate and inflated bills, purchasing multiple policies, staged accidents and fake disability
claims.
Moreover, agents and brokers are also involved in frauds, which could include providing fake
policies to customers and siphoning off premium, manipulating pre-policy health check-up
record, guiding customers to hide pre-existing diseases or chronic ailments and fudging data in
group health cover.
Also due to absence of standard medical protocols, hospital-induced frauds overcharging,
inflated billing, unwarranted procedures, extended length of stay, fudging records and patient
history and even billing for services.
A Ficci sub-group on health insurance frauds has highlighted the concern that insurance fraud is
not defined under the Indian insurance act. Even other instruments with the Indian legal system,
such as the Indian Penal Code (IPC) and the Indian Contract Act, do not offer specific laws. The
sections of IPC which deal with issues of fraudulent act, forgery and cheating are sometimes
applied, but none of them is specifically targeted at insurance frauds and are inadequate for
acting as an effective deterrent.
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According to a survey by Ernst & Young on frauds in insurance, the Indian insurance sector
incurs a loss of more than 8% of its total revenue collection in a fiscal year. The average ticket
size of a single fraud ranges between Rs 25,000 and Rs 75,000.
In 2010, some of the leading public sector general insurance companies had a major standoff on
treatment costs with the providers due to which insurers de-empanelled many network hospitals
from their existing list and later restored them by forming a Preferred Provider Network.
To reduce the proportion of frauds, Insurance Regulatory and Development Authority (IRDA)
has mandated sharing of claims data. IRDA has also issued comprehensive draft guidelines on
health insurance covering several contentious issues. These guidelines are aimed at standardizing
several important aspects.
Analysts say that health insurers need to set up a detailed anti-fraud department to developed and
implement a programme to combat frauds.
The Ficci working paper on health insurance fraud, has said that there is a need for tele-
underwriting or proposal verification call, which should ideally be a centrally controlled process
to ensure that contents in the proposal form reflect the policyholders understandings and
specifically include conformation that no pre-existing disease exists. This must be done before
policy is issued and will help minimize agent-led fraud.
The use of recorded calls will help to substantiate evidence of fraud at the claims stage.
Moreover, the call can be utilized to confirm that the policyholder fully understands the policy
benefits and exclusions.
Pre-authorization can be the first-level check to curb fraud. Pre-authorization request for
scheduled surgeries must be submitted at least 24 hours before admission and the
implementation of the standardized, discharge summery and billing format can check frauds.
Taking a cue from the global mechanism for managing frauds, the Ficci report says that
deployment of robust technology and data analytics process can detect outlier behavior and be an
early warning system for detecting fraud.
Report also said that policyholders should be send a detailed breakdown of benefits what they
have paid for can be an effective way to check any impersonation or billing for services not
provided had occurred.
Moreover, insurance industry can collaborate with the Insurance Information Bureau to create
benchmarks that can be used by individual stakeholders to obtain better insight into their overall
performance.
A proven approach in this direction, the Ficci report suggests, is to aggregate all industry data in
a single data warehouse and, then, develop various benchmarks that an individual insurer can
compare itself with. These benchmarks need to be developed carefully so that they can facilitate
comparison on a like-for-like basis.
Indian Insurance Industry Borne Loss of Rs 30,000 crore on Account of Frauds
in 2011
Posted on March 5, 2012 by PolicyMantra Team
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According to the study conducted by Pune based company Indiaforensic has shown a worrying
trend. As per the findings of the study Indian insurance companies have borne a loss of Rs
30,401 crore in 2011 due to different kinds of frauds. This loss is approximately 9% of the
estimated size of insurance industry in 2011. Loss of insurance companies due to frauds has
doubled in last five years as in 2007 total loss on account of frauds stood at Rs 15,288 crore.

In 2011 total premium income of insurance industry including life, non-life and health insurance
companies is around Rs 3.5 lakh crore.

As per the study, reasons for these frauds includes collusion between employees of insurers and
private persons, document falsification and manipulation in citing cause of death to claim
insurance benefits.

As per the study about 86% frauds took place in life insurance industry while remaining 14%
frauds were in general insurance industry (which includes risk to loss assets like car, house,
accident etc).

Study also said that frauds in life insurance industry have doubled in last five years while in non-
life segment it grew by 70%. In 2007 losses due to frauds from life insurance segment stood at
Rs 13,148 crore while it stood at Rs 2,140 crore.

Insurance sector is susceptible to frauds in India hence, there is an urgent need to have strict
measures such as setting up a dedicated unit to detect and check frauds in the companies.

As per the study insured were defrauding companies by not disclosing existing diseases by
manipulating the empanelled doctors while applying for the policy.

All insurance policies have eligible age in which only a policy can be bought hence, to
accommodate oneself into the product or to enjoy lower premiums age proofs are modified to
show reduced age.

Some case require medical test to issue the policy however, to substantiate non-disclose or
misrepresent medical facts, a different person can be send at the time of test. This may help a
person to get a policy but at the time of claim it creates a discrepancy.

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There were also cases where date of death on the death certificate is fraudulently changed to the
death before the actual death when the policy was in force so as to register the claim.

Medical bills forgery is the most common fraud in health insurance segment. In all total falsified
document cases 31% cases are of forged medical bills.

Second common scheme of fraud in general insurance segment is non-disclosure of facts.
Traveling abroad for surgery without disclosing and getting a damaged vehicle insured without
disclosing the accident are very common schemes.
Health insurers increased their efforts to counter fraud claims
Posted on December 30, 2011 by PolicyMantra Team
In order to prevent increasing fraudulent claims health insurance companies and their Third Party
Administrators (TPA) have increased their efforts to counter frauds. Insurers are becoming pro
active and investigating suspicious claims and for this they are even enlisting support of external
agencies.

In health insurance fraud can originate either from application level due to incomplete disclosure
or at claim level, individuals with hospitals feign illness to get claim. And there are also cases
where hospitals inflate bills for insured.

As per the recent insurance frauds survey conducted by consulting firm Ernst & Young, rising
cases of insurance frauds is not only increasing cost for insurers but it also rising premiums for
policyholders. In the survey 40% respondents said there is rise in insurance frauds in last year.
80% Respondents of the survey said that insurance frauds may increase costs for insurers by 1%
or in some cases it can go above 5%.

Measures
First measure that they have taken is to pay surprise visit to hospital during insureds stay or to
their homes to check their case papers. Sometimes insurers also outsource this to agencies that
specialize in this investigation. Doctors who will represent insurers will visit hospitals and verify
whether or not claim is genuine.

Another step that insurers have taken is to black list hospitals. If one Insurer finds that claim is
fraudulent then it blacklists that hospital and insurers share this data with each other. Insurers
also share this data with General Insurance Council (GIC) which maintains database of it.

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Insurers are also trying to make sure that such hospital is not empanelled by any other insurers.
Logic behind this is that it will impact their business and then it might force them to change their
practices.

Four public sector general insurers are also pro active to take fraud preventing steps. General
Insurers Public Sector Association (GIPSA) also insists on intimation before discharge of insured
in case of all reimbursement cases.

Last year all public sector general insurers cracked down hospitals which according to them were
over charging. Only when hospitals agreed for standard rates for cashless treatments prescribed
by them general insurers put them on their Preferred Provider Network (PPN) list.

As per insurers fraud counter mechanism will also help genuine claimants as if frauds will be
prevented then it will not hinder their claim process.

As per insurers to avoid coming under the scanner of health insurance companies policyholders
should also make due diligence. Policyholders should also inquire about the bills of the hospitals
this will help in them in long run. As if they wish to shift to another health insurance company
then policyholder with healthy claim history can get good premium rates from new insurer.

Fraud cases in insurance may increase the premiums
Posted on June 3, 2011 by PolicyMantra Team
No Comments
Ernst & Young in their recent survey said that increase in the fraud cases may put the pressure on
insurers to hike the premiums by 3-5%.
Despite the fact that insurance sector in India is growing by 20% year-on-year basis but increase
in fraud cases put extra burden on the insurers.
According to survey fraud in insurance can increase the cost for insurers by one per cent and it
may rise to 5% in certain cases.
Insurance sector is more prone to frauds because it depends heavily on third party such as
distribution channels for its sells.
Fraud cases are related to misselling and presentation of fake documents at the time of policy
issuance. Therefore there is a need to make right mechanism to detect frauds.
A policy holder must also be careful while handing-over the cash to the agents or employees of
insurance companies as in past there have been instances where customers are duped and
provided fake documents. A customer must also try to buy policy directly
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Insurance Fraud
Insurance fraud is believed to be the second largest white-collar crime in the
United States. Insurance fraud is often mistaken for a victimless crime, but it
affects everyone by making insurance premiums more expensive.
How to avoid health insurance fraud
For some, tips on how senior or others avoid health insurance fraud are :
Avoid signing blank insurance form.
Review the insurers benefit statement carefully calls if you have any
question or need any clarification.
Keep you insurance identification number secret; insurance crooks can steal
it and involve you in scams.
Make note of all your health care and medical appointments.
Refuse to do business with door to door or telephone salesperson who offers
free medical services or equipments.
Stay alert, ask questions, and go slow or back out if an insurance transaction
seems suspicious.
Contact your state insurance department and the National Insurance Crime
Bureau (1-800-835-6422) if you think youre being scammed or someone
asks you to take part in a fraud.
Contact your state insurance department to make sure the agent and
company are licensed.
The insurance industry in the United States consists of more than 5,000 companies
with over $1.8 trillion in assets. It is broken down into two segments of equal
importance: property/casualty and life/health. The insurance industry is one of the
largest and more interdependent of the United States industries.
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Insurance fraud has become one of the most prevalent and costly white collar
crimes. Public concern about the price of insurance and the solvency of the
insurance industry has prompted the insurance industry to conduct both internal
and external reviews of the various insurance cost elements. According to a
published study by the Coalition Against Insurance Fraud (CAIF), fraud is among
the most prominent cost components escalating the costs of insurance. The CAIF
has estimated the annual loss figures relative to insurance fraud (non-health
insurance) to be approximately $26 billion.
Outside of the CAIF figure, the life/disability insurance segment of the industry
opines that approximately $1.5 billion is lost each year through fraudulent
schemes.
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household contents - fraud - police not informed of full loss -
whether sufficient reason for rejecting claim.
Mr and Mrs B returned home from an evening out to find they had been burgled. They
notified the police right away and rang the firm the next morning. The claim form they sent
the firm listed 63 stolen items, with a total value of over 20,000.
The firm's investigator was suspicious about the claim and his enquiries continued for the
next eleven months.
During the enquiries, the couple's insurance came up for renewal. The firm took more than
two months to consider the matter and then refused to renew. The couple were unable to
obtain any replacement insurance.
Almost a year after the loss, the firm rejected the claim. It said that when Mr and Mrs B
reported the loss to the police, they had not mentioned all the items they later claimed for.
It also said that Mr and Mrs B had not provided all the help and information it needed.
complaint upheld
Mrs B said that she had still been in shock when she reported the burglary to the police and
she had only mentioned the most obvious items that were missing. This explanation was
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entirely credible. Theft victims may well not be aware of the full extent of their loss within a
few minutes of discovering it. In any case, Mrs B had mentioned most of the missing items
when she telephoned the firm the morning after the burglary. And the couple had receipts
for nearly everything.
We required the firm to settle the claim and to pay 500 compensation for its
maladministration. We did not think it had handled the claim well, and it had not given Mr
and Mrs B sufficient notice that it would not renew their insurance.