You Can Help Keep Insurance Costs Down

Insurance protects your family from the high cost of unexpected disasters for a relatively low annual amount. However, insurance fraud forces insurance companies to raise their rates to cover their losses from illegal activity. You can speak to an insurance agent near you to learn about their policies towards insurance fraud.

What is Insurance Fraud?

When a person makes a fake claim to an insurance company, and the insurance company pays them the required amount, they customer is committing insurance fraud. One example is if a business person is in debt and decides to get fire insurance money from his or her insurance company by burning down their business. In up to 10 percent of such cases, fraud cannot be proved, and the insurance company is forced to make the payment.

This type of activity hurts the honest customer, because the insurance company needs to raise its rates for everyone to cover such payouts.

Some people have legitimate claims, but they exaggerate the situation. For example, if they are in an automobile accident they have a legitimate claim, but they may include a broken windshield in the claim that was broken before the accident.

What Can Insurance Companies Do?

Insurance company employees are trained to recognize questionable responses, motives and behaviors. When they believe there is fraud, they actively investigate the claim and work with other insurance companies and investigators to put a stop to as much fraud as possible. If fraud is suspected, they will support law enforcement and court action to prosecute the perpetrators. They may also depend on help from their customers to report insurance fraud if they suspect it.

There are several different methods used by insurance companies to detect fraud. For example, property fraud is usually committed sometime after the policy has been in force. A person may decide to claim for a theft that never actually happened. Life insurance fraud usually needs to be detected at the time the person is taking out the policy. Today, before the policy is approved, a sophisticated process of investigation is conducted. Health insurance fraud consists of filing claims for injuries or illnesses that don’t exist.

If there were no insurance fraud, the cost of everyone’s insurance would decrease dramatically. This is why it is important for everyone who needs to buy insurance to report any activity they suspect is fraudulent.

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