Insurance Fraud Can Lead to Higher Premiums

...and costs an estimated $30 billion each year.

Insurance fraud is a specific crime in nearly every state. It is punishable by fines, restitution and, in serious cases, even jail time. It occurs when someone knowingly lies to an insurer to obtain payouts or benefits to which they are not actually entitled.

Despite the best efforts of SIU specialists and law enforcement, this crime is tough to prevent and prosecute. People like you are the first — and best — line of defense against insurance fraud.

Fraud Comes in Many Forms

Fraud can be a criminal act that is physically and/or financially harmful to an innocent victim (i.e., "Hard Fraud"), but more often it takes shape as inflated claims, exaggerated injuries, and misreporting of assets (i.e., "Soft Fraud").

Dependent on the nature, location, and severity of the crime, a person convicted of fraud may face:

Community service
Probation
Fines and Restitution
Incarceration

What is Hard Fraud?

Hard Fraud is acting to deliberately defraud an insurer. It can be as simple as a faked slip and fall, or as dangerous as arson or an intentional auto collision. Hard fraud schemes are often used by organized crime groups to defraud substantial sums from insurance providers and their customers. Examples of Hard Fraud include:

Staged Auto Accident: Through planning and coordination with other criminals, one driver forces another into a collision. Planted witnesses tell police that the victim was at fault.
Planned Vehicle Theft: A vehicle owner has a partner steal his car, bike, or boat, then sell it, destroy it, or strip it for parts.
Staged Home Robbery: A homeowner arranges to have his home 'robbed' while he is out of town. In reality, his property was moved to a storage facility until the insurance claim is approved.
Double Billing and Phantom Patients: Certain unscrupulous health care providers have billed private insurers and Medicare for procedures that never took place, or patients who never existed.

Insurance Fraud is On The Rise in America

Since 2007, fraudulent insurance claims in America have increased year-over-year in virtually every category. States and cities with no-fault laws and Personal Injury Protection (PIP) are particularly prone to auto insurance fraud because accident claims must be paid out regardless of who is at fault, opening the door to opportunist criminal claims and organized hard fraud schemes.

Insurance fraud is classified as a crime in almost every state. Most states have established fraud bureaus to fight it. Despite these facts, the National Insurance Crime Bureau reports a 23 percent rise in questionable insurance claims from 2008 to 2010.

What is Soft Fraud?

Soft Fraud is far more common than Hard Fraud. It typically comes in the form of exaggerations and outright lies told to pad a payout or reduce premium payments.

As innocent as this crime may appear, it is still a crime. The fact that many people find Soft Fraud to be an acceptable "white lie" does far more to inflate premiums than hard fraud. Some examples of Soft Fraud include:

Missing Drivers: A family of five fails to inform their insurer that there are two teen drivers in the household, not just mom and dad.
Over-Reporting: A person with renter's insurance inflates the value of the computer and stereo equipment stolen from his home during a robbery.
Lies About Location: A man uses his parent's address in the country to register and insure his car in the city. He also tells his insurer that he drives ½ the total number of miles that he actually does.