Know the Types of Insurance Fraud

There is fraud in insurance when a person or company intentionally lies to acquire an advantage or benefit or when someone intentionally avoids or denies someone some benefit that is due to him. In short, insurance fraud is a crime, particularly a class six felony. A person convicted of insurance fraud would spend 10 years in jail and be fined $150,000. Again, for insurance fraud to exist, the following must be present: the intention to deceive a person who buys the insurance or the insurer, the knowledge that what he is doing is wrong, assistance or creation of false impressions to entice an insurer to pay a claim, and misrepresentation so that the insurer would feel safe and pay the claim.

There are many types of insurance frauds and one of this is the auto insurance fraud. Here, the insurance fraud includes staging or forcing accidents. It may also entail reporting stolen car falsely or adding items not damaged for claims. Misrepresentation of application for the insurance is also considered fraud. The two common types of property insurance fraud are arson and disaster fraud. In arson, a property owner knowingly damages or destroys his property by fire. In disaster fraud, an insurer reports more damages than the actual or collect damages for nonexistent properties. Medical fraud usually involves fake injuries or treatment of injuries longer than necessary. These two instances are quite common in workers' compensation fraud.

In auto insurance fraud, specific types of insurance fraud include in automobile collision: sudden stop, backing, phantom vehicle, right of way, hit and run, pedestrian vs. auto. Fraudulent claims for automobile property include: vehicle theft, faked damages, vehicle arson, and auto/property vandalism.

Claims for medical insurance fraud usually involve slip and fall, pharmacy bills, disability, inflated billing, food contamination, and dental cost. Life insurance fraud has more to do with questionable death and suspicious or false policy application. Workers' Compensation fraud could be anything, but usually involve claimant fraud, legal provider, pharmacy bills, under reported wages or premium fraud, embezzlement, employer defrauding employee, medical provider, misclassification, x-mod evasion, and uninsured employer. Other types of insurance fraud involve casualty and agricultural livestock.

According to estimates, about 20 to 30 percent of insurance claims are knowingly overstated or just plain fraudulent. These days, ten percent of the auto insurance premium is set aside for the cost of fraud. This is how serious the problem of fraudulent claims has become. Most people think that insurance fraud is common, but this is just a misconception. Bottom line is fraud is a crime and must be punished by law.

Because of the rising number of fraudulent claims, the insurance industry protects itself by spending about an additional $200 in insurance premiums due to insurance fraud. In the United States, insurance fraud ranks second place to tax evasion as the most expensive white collar crime. The National Insurance Crime Bureau reports that the total cost of insurance fraud goes beyond $100 billion yearly. Now, it is no wonder why insurance policies are becoming increasingly expensive to afford.