Insurance fraud act is known to be an act that is committed in order to get profit by following wrong ways from a process of insurance. In this fraud, a person or you can say a claimant use to go different attempts for getting the benefit even if they are not in the list. Common fraud schemes according to the investigation bureau of United States of America include fee churning, worker compensation frauds, premium diversion and asset diversion.
Claimants are not the perpetrators in all cases. Sometimes, employees of the insurance company also do so. Insurance fraud is easily attached with the name of false insurance claims. These claims are that claims of insurance that are filled in order to get benefit from the insurance company, if we are not supposed to get benefit from the company. These types of fraud are not new. These are present since the insurance companies came into being.
Causes of insurance fraud act:
There are so many major as well as minor insurance fraud causes behind these acts. These causes vary from person to person and from company to company. Most common cause is the financial profit. Multiple opportunities regarding exploitation are provided to both insurers as well as to the insured by insurance contracts of a company. Greed plays a very prominent role in this regard. Drug dealers are on the top as they think that entering into the acts of insurance fraud are much better than remaining at street corners.
Over-insurance is another reason behind insurance fraud act. It happens when propertys actual value is far less than the insured amount of the property. This condition is considered as very tough to avoid.
Loss because of insurance fraud act:
If someone does insurance fraud act then there will be so many losses. It is so because no one can determine the amount of money that is stolen in this type of fraud. Fraudsters designed this fraud act in such a way that no one could detect it. This type of act is very different from all other forms of crime like murder or robbery. If the loss goes up to the average limit, then the insurance company faces so many issues. Insurance policies of some other person can also get affected by this act of insurance fraud. It is so because the company is not able to give coverage to their damaged property because of the insurance fraud act.
Types of insurance fraud:
There many different types of insurance frauds but some are very common. Below mentioned are some common insurance fraud types.
Hard Fraud: In hard fraud, a loss is deliberately being invented or planned by someone such as: auto theft, fire or collision. In this type of hard fraud, criminal rings can surely be involved. These criminal rings can steal a great amount of money from the insurance company.
Soft fraud: In soft fraud, policyholder exaggerating is there rather than legitimate claims.
Life insurance fraud: This type of fraud can include the fake death of someone in order to claim the life insurance plan. These fraud people, after getting the life insurance use to appear after some years in order to avoid any legal issue.
Health care insurance fraud: In this type of fraud, false information is given to the insurances company regarding health of some one.
Automobile insurance fraud: Here, fraud person mentions a fake automobile accident in order to claim insurance for the automobile.
This is how insurance fraud works, and after reading this piece of writing, you must be aware of what you need to take care while purchasing insurance policies.