It may seem that the insurance company is the only one who suffers insurance fraud. Only the insurance company loses money from fraud, right? Actually, no.
The typical American family pays nearly $950 per year in higher premiums to contain the costs of insurance fraud according to The Coalition against Insurance Fraud.
Also, the expense businesses pay for insurance is therefore exaggerated and that extra expense is passed onto the consumer by elevated prices.
The financial responsibility of fraudulent claims is not left with the insurance company, but transferred onto the consumer in higher premiums and in the cost of consumer goods.
So what exactly constitutes as insurance fraud? It isn’t just the criminal that is out planning involved schemes to swindle insurance companies out of millions.
Insurance fraud can be committed by the average Joe telling little white lies to get a little more paid on their insurance claim than they are actually entitled to. The diabolical criminal example above is an example of hard fraud. Hard fraud is committed by a person or a group of people that intentionally set out to defraud an insurance company.
Anything from pretend car accidents, murder for insurance, or filing fraudulent medical bills fit into this category. These acts are deliberate and try to deceive insurance companies to give them money they don’t deserve.
Soft fraud is when someone lies to an insurance company to either lower their premium costs or raise their claim settlement.
An omission such as a recent speeding ticket to reduce the cost of insurance is considered soft fraud. Insurance companies base prices on the risk being insured.
Drivers should have to pay the premium related with their risk. Another example of soft insurance fraud is exaggerating a claim. For example, if someone embellishes the cost of a claim in the hopes of making money off of it, that is considered soft fraud.
Insurance was intended to compensate people so that they don’t have to a reserved amount of cash for emergencies at all times.
Insurance brings consumers back to where they would have been had the claim not occurred. Insurance policies are not meant to pay people just because they incurred a loss.
People frequently think soft insurance fraud is justified based on the assumption that the insurance company is making millions of dollars in profit off of its policy holders.
Therefore, they think it is defendable in that they are just getting their part.
The cost of fraudulent claims doesn’t come down on the insurance company; it is transferred onto the consumer with higher insurance premiums. The victim of insurance fraud is really the consumer.
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