April 15, 2024

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Insurance Fraud – How to Spot and Prevent It

Insurance provides us with financial security against property loss or injuries, yet dishonest individuals have exploited its benefits by engaging in fraud schemes.

At various points during an insurance lifecycle, fraudulent activity can often take place: during application (such as by making false or exaggerated claims); at claim time itself; and during premium collection.

Know Your Coverage

People who commit insurance fraud put not only their own interests before those of innocent policyholders. According to estimates by the Coalition Against Insurance Fraud, fraudulent claims cost American consumers an estimated annual average cost of an additional $400 in higher premiums.

Social media provides fraudsters with a way to conceal their schemes, yet even with just one search on Facebook or Instagram for the claimant, information can often be unearthed that reveals incriminating evidence that can expose their scheme.

“Trust but verify” holds particular relevance in insurance. Application fraudsters frequently falsify information when filling out applications; to prevent this from occurring, companies should employ a central database which allows insurers to quickly, easily, and more effectively verify all submitted customer information in real-time. Unit21’s advanced solution can assist you in detecting fraud at multiple levels – transaction, entity and network level. Request a demo now to learn how you can detect fraudulent activities more efficiently!

Know Your Insurer

“Trust but verify” has never been more pertinent in the insurance industry than today. People can falsify information and their identities to gain coverage; therefore companies must implement stringent customer due diligence procedures during onboarding processes in order to identify any fraudulent applicants and protect themselves.

Once policies are in place, they must be closely managed in order to detect fraudulent activities quickly. Activity and event monitoring tools are an invaluable way of doing this quickly; activity and event monitoring tools in particular may prove particularly helpful when policyholders submit documentation that could potentially result in changes (such as new medical records, bank accounts or employment status changes), it’s vital that these changes are authenticated quickly so as to prevent fraud from taking place.

Insurance fraud affects everyone; not just insurance providers. Dishonest behavior drives up premiums for everyone – as higher car, health coverage and business premiums pass directly onto consumers and affect prices at department and grocery stores.

Know Your Rights

Insurance policies exist to provide financial security when an unexpected loss strikes; unfortunately, those engaging in fraudulent claims submit false compensation requests and undermine these positive aspects of insurance policies.

Fraudsters frequently employ additional parties to substantiate their false claims. This may involve having mechanics falsify documentation to support repairs that never happened, police filing false accident reports or doctors documenting fake injuries – making it exceedingly difficult for organizations to detect fraudulent activities.

Soft fraud typically takes place during the application phase and involves falsifying information to secure either a higher or lower premium. For example, applicants might falsify employment status or income details on their application for insurance policies.

To combat this type of fraud, ensure all employees in your organization – not just claims and underwriting professionals – are informed about common insurance scams so they can identify red flags quickly and accurately. Furthermore, implement a tool to authenticate changes made to an insured’s account or policy that could indicate fee churning schemes.

Know Your Limits

Insurance fraud is illegal in nearly all states and the District of Columbia; many have even established fraud bureaus dedicated to monitoring this crime. Fraudulent insurance acts can take the form of any statement submitted as part of an application, rating or claim that contains materially false information with intent to defraud an insurer. Such acts could range from creating false claims without authority to more complex schemes that intentionally take advantage of an insurer. Soft insurance fraud usually takes the form of lying or withholding information on an application in order to reduce their premium; for instance, purchasing two identical items and damaging one so they can claim it was stolen; or misrepresenting their current medical state on life insurance forms in order to qualify for larger payouts.

Fraudsters are constantly devising clever schemes to cheat insurance companies and their consumers out of billions each year, according to estimates by the Coalition Against Insurance Fraud. According to this estimate, these thefts have cost Americans an estimated annual loss of at least $80 billion!