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
- Fines and Restitution
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.