Get Smart About
What many Americans don't know is that insurance fraud increases
insurance rates for consumers nationwide. According to the National
Insurance Crime Bureau (NICB), insurance fraud costs each American
household $200 to $300 per year—a loss totaling at least
$30 billion a year.
Educate Yourself. Knowing what fraudulent practices are in
use enables you to best protect yourself from becoming a victim of
Protecting Yourself from Insurance Fraud
In conjunction with NAIC, state insurance departments sponsor an
annual "Get Smart about Insurance Week," to educate consumers on
their insurance rights and insurance fraud protection.
You can "get smart" about insurance fraud 52 weeks out of the
year by doing the following:
Stop. Call. Confirm. Before signing up for a new policy,
stop, call your state department of insurance and confirm
that your agent or company is licensed to sell insurance in your
state. You may also want to do some
research on your agent or
company through consumer sites like A.M Best, or Weiss Ratings.
About Insurance Fraud
Insurance fraud is defined as an intentional misrepresentation of
facts and circumstances to an insurance company to illegally obtain
funds. Insurance fraud is a very common white-collar crime, right up
there with tax evasion.
Insurance fraud can be committed at different points in the
insurance transaction, by applicants, policyholders, third-party
claimants or professionals such as physicians or chiropractors who
provide services to the claimants. Insurance fraud may also be
committed by insurance agents by misrepresenting themselves to a
client, resulting in the consumer paying for coverage he or she may
not actually have.
Insurance Fraud: Hard vs. Soft
"Hard" insurance fraud occurs when there is a deliberate attempt
to stage or invent an accident, injury, theft or other incident that
would be covered by insurance.
In the world of auto insurance fraud, "crash test dummies" are
known as drivers and passengers used in staged auto accidents.
“Crash test dummies" will typically approach people and convince
them to participate in the scam, saying that legal, medical and all
other paperwork will be taken care of. Generally, the two motorists
will then crash their cars into each other and report the accident
to authorities. In addition, the driver and any passengers in the
car will falsely claim they were injured in the accident.
The result for consumers? Auto insurance fraud increases premiums
for everyone—criminals and law-abiding alike.
In Florida, a new trend in hard auto insurance fraud is called
"ditching" or "owner-give up." "Ditching" typically occurs when the
owner can no longer afford the vehicle or is otherwise unhappy with
it. The vehicle is then dumped somewhere or burned, after which the
claimant reports that his or her car has been stolen or victim of
On the other end of the fraud spectrum, "soft" insurance fraud
occurs when the policy holder exaggerates a legitimate claim. Soft
insurance fraud also occurs when people provide false information
their insurance agent to favorably affect the underwriting of their
policy. Soft insurance fraud includes fudging facts, like the number
of miles driven and where a car is garaged, or providing an
inaccurate medical history when applying for health insurance.
Both hard and soft fraud contribute to all forms of insurance
fraud—auto, health, home and life—and takes money out of the pockets
of consumers across the country.
Combating Insurance Fraud
Groups such as the NICB and the National Association of Insurance
Commissioners (NAIC), along respective state departments of
insurance, are combining their efforts to combat insurance fraud and
teach consumers to protect themselves.
Community outreach programs remain at the forefront of the
campaign to stop insurance fraud. Many cities are conducting
training programs for consumers, as well as law-enforcement
The nation's property/casualty insurers have made significant
investments to create Special Investigative Units which are composed
of specially trained professionals to investigate suspicious
insurance claims and track down offenders.
Some states are taking things into their own hands, enacting laws
to deter fraud and setting up fraud bureaus devoted to fighting
Keep Record of Payments. If you pay for your premium with
a personal or cashier's check make sure to get a receipt for your
payment. And never, under any circumstances, make the check out to
your agent. To be even better protected, keep a copy
of your checks or cash payments to your care
provider because someone "somewhere along the chain"
can be padding the statements being sent to your
insurance company. Insurance investigators are
combing records of incoming statements, and they are
going way back in the records for any sign of
Get a Checkup. Make an annual appointment to meet with
your insurance agent to go over any personal insurance policies you
have. This will allow you to make adjustments to your policy and ask
any questions that may have arisen since you last
spoke with your agent.
Report Fraud. If you suspect you or someone else is a
victim of any form of insurance fraud, contact the NCIB at (800)
TEL-NCIB, your state's department of insurance or visit the NAIC on
the Web to fill out an online form. Reports or complaints can be
made anonymously, so don't hesitate to share information about a
fraudulent agent or claimant.
Fighting insurance fraud is a difficult war to wage, but
government assistance in combination with consumer knowledge can
make all the difference.