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Insurance fraud occurs when an insurance consumer, company, or agent attempts to dishonestly acquire money. It is a serious and costly crime that has resulted in the average American family paying an added 400 to 700 dollars in premiums each year, as well as over 40 billion dollars being lost per year. Given how much being the victim of insurance fraud can cost you, you will likely want to know how you can prevent it from happening to you. Here are some common types of insurance fraud, how to protect yourself from them, and what to do if your best efforts to protect yourself fail.
The most frequently-used insurance fraud scheme is called premium diversion. In this type of scam, your insurance agent will pocket the insurance premiums you intend to pay to the underwriter for themselves, sometimes producing sham insurance policies. Or, they will lack a license to sell insurance and you will not be able to receive money from them even if you decide to file a legitimate claim. The best way to protect yourself from this kind of scheme is to carefully research which insurance agent or agency you choose to use when you need to buy insurance, ensuring that they have a license with your state’s insurance department. You should also keep track of all conversations with your agent and obtain copies of your insurance documents. If your insurance agent is unable to provide you with a copy of your policy or another important document, get in touch with your insurance company and they may be able to help you. You should contact the insurance regulator of your state as well.
Another common kind of insurance fraud is auto insurance fraud. A well-known variant of this type of fraud is when the fraudster deliberately causes a crash between their car and yours in order to receive an insurance payout. To lower your chances of being victimized by this kind of fraud, practice safe and defensive driving. Leave a safe distance between your car and other cars on the road and obey all traffic laws. If you do get into a collision with another driver, make sure you record important details such as the cars’ license plate numbers and who is at the scene of the crash. Purchasing and using a dashboard camera, or “dash cam”, can help provide evidence as to whose fault the crash was, but you should also take photos of the vehicle after the crash has occurred. You should also notify the police and request a police report. If you believe someone may have committed auto insurance fraud against you, tell your insurance company as soon as possible.
Sources:
- https://content.naic.org/cipr-topics/insurance-fraud
- https://www.fbi.gov/stats-services/publications/insurance-fraud
- https://www.forbes.com/advisor/car-insurance/agent-steals-premium/
- https://www.allstate.com/resources/car-insurance/types-of-car-insurance-fraud
- https://smartasset.com/financial-advisor/insurance-fraud
- https://www.einsurance.com/journal/how-to-protect-yourself-from-auto-insurance-fraud/