Feeling the pinch and need to make some extra cash? You might be considering a side hustle. Freelance graphic design, flipping thrift store finds, or driving for DoorDash are all good options. But what about throwing yourself in front of a moving car? Hold up, that’s not a good idea. It’s illegal, dangerous, and it’s called insurance fraud.
So, what is insurance fraud? It’s any deceptive act related to insurance that’s done for financial gain. It’s illegal and can lead to serious consequences, from denied claims and higher premiums to felony convictions and even jail time. And it’s not just policyholders who can commit insurance fraud. Insurance agents, brokers, companies, and even third-party claimants can be guilty of it too.
Insurance fraud is a big deal. The FBI estimates it costs the insurance industry about $40 billion per year, excluding health insurance fraud. This adds between $400 and $700 to the average family’s annual insurance premiums.
Insurance fraud can be categorized into two types: hard fraud and soft fraud. Hard fraud is when a claim is completely fabricated, like deliberately damaging insured property or falsely reporting property as stolen. Soft fraud, on the other hand, is when a valid policy or claim is manipulated for personal gain, like omitting important information on an insurance application or exaggerating the circumstances of a claim.
There are different types of insurance fraud committed by policyholders, claimants, and insurance industry professionals. For policyholders and claimants, these can include application fraud, claims fraud, and disaster fraud. For insurance agents, brokers, and company employees, these can include premium diversion, unauthorized sales, fee churning, and denying legitimate claims.
The penalties for insurance fraud can be severe, depending on the type of fraud and the amount of money involved. They can range from fines to prison time.
Insurance fraud affects everyone, not just those who commit it. It can lead to higher premiums for policyholders and can result in direct financial losses for those directly targeted by it.
If you suspect insurance fraud, you should report it to the insurance company involved, the National Insurance Crime Bureau, and your state insurance commission or department of insurance.
Remember, insurance fraud is a serious crime. It’s important to be honest in all your dealings with insurance companies, from your application to any claims you make.
