Feeling the pinch in your budget? Looking for ways to make some quick cash? You might be considering a few side gigs like freelance graphic design, thrift store flipping, or driving for DoorDash. But then, a wild idea pops into your head – what about insurance fraud? Hold up! That’s illegal and definitely not recommended. But let’s talk about it anyway, just so you know what it is and why you should steer clear.
Insurance fraud is any deceptive act related to insurance that’s done for financial gain. It’s a broad term that can cover a lot of different actions, and it’s not just policyholders who can commit it. Insurance agents, brokers, companies, and even third-party claimants can all be guilty of insurance fraud. It’s a big deal, costing the insurance industry around $40 billion a year, which adds between $400 and $700 to the average family’s annual insurance premiums.
There are two main types of insurance fraud: hard and soft. Hard fraud is when someone makes up a claim, like damaging their own property on purpose or faking a death to collect life insurance. Soft fraud is more about manipulation, like leaving out important information on an application or exaggerating a claim to get a bigger payout.
There are also different types of fraud depending on who’s committing it. Policyholders and claimants might commit application fraud, claims fraud, or disaster fraud. Insurance agents, brokers, and company employees might commit premium diversion, unauthorized sales, fee churning, or deny legitimate claims.
The penalties for insurance fraud can be severe, ranging from fines to prison time. And it’s not just the person committing the fraud who suffers. Insurance fraud affects everyone, increasing premiums and potentially leaving you with a worthless policy or a denied claim.
So, who commits insurance fraud? Pretty much anyone can, from insurance applicants and policyholders to insurance agents and company employees. If you suspect someone of insurance fraud, you should report it to the insurance company, the National Insurance Crime Bureau, and your state insurance commission.
The most common type of insurance fraud is soft fraud, especially in auto insurance. If you think your legitimate claim has been falsely denied, you can appeal by providing more evidence or hiring a public claims adjuster or insurance attorney.
If you suspect your insurance company or agent of fraud, report it to the company’s fraud reporting hotline, the National Insurance Crime Bureau, and your state insurance regulator.
In conclusion, insurance fraud is a serious crime with serious consequences. It’s best to stay on the straight and narrow, even when times are tough. And remember, even leaving something out on your insurance application can be considered fraud, so always be honest and upfront.
