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Who, Me? Fraud? I Was Just Being Creative!

Fraud is such an ugly word.  So ugly, in fact, that we call it all kinds of other things: ‘padding’, ‘inflating’, ‘staging’, ‘exaggerating’, ‘mis-remembering’, ‘photo-shopping’  – the list is long.

In truth, fraud is more than just an ugly word.  It’s an expensive and pernicious problem that challenges us in all aspects of our lives, from  kindergarten classrooms and playgrounds to office suites and boardrooms and beyond.  And insurance fraud is right up there with the best of them.

Technically, insurance fraud is a deception, a deliberate deception, perpetrated by or against an insurance company or agent for financial gain.  It is committed at any number of points during an insurance transaction: by applicants, by policyholders, by third-party claimants, or by those professionals who provide services to the industry.

We’ve all heard of staged car crashes and accidents.  This is classified as ‘hard’ fraud.  Hard fraud is the deliberate effort to either invent or stage or otherwise manipulate an injury, accident, fire or theft that is covered under an insurance policy.

There is also inflating real claims – when the legitimate fender bender also pays for damages that had nothing to do with the accident.  And a homeowner or business owner might be very tempted to exaggerate the value stolen property.  Or to throw in a claim for a necklace that was really lost on that cruise last year.  This is ‘soft’ fraud, but fraud nonetheless.

It is also soft fraud when someone deliberately provides inaccurate information on an application in order to influence an underwriter, hoping to reduce premium payments or even get the coverage in the first place.  Car mileage is under-reported; the employee count is adjusted on a workers compensation census; job descriptions hide the real nature and risks of a employee’s work; where a car is normally parked or stored is misrepresented.  All fraud.

Insurance industry analysts admit that the exact amount of fraud committed each year is hard to pin down.  It is about 10% of the property/casualty insurance industry‘s annual losses.  No-fault fraud cost insurers and consumers some $229 million in New York State alone in 2009.  The proportion of fraud varies among different insurance lines, with, predictably, workers compensation, auto and healthcare being the most vulnerable targets.

And – no surprise here – insurance fraud is evolving right along with technology, getting more sophisticated all the time.  It is also believed by experts that fraud escalates markedly during periods of economic crisis and recession. You think?

So what to do?  You know the drill.  Do not inflate claims.  Complete applications honestly and correctly.  Make sure you are dealing with a reputable agent and with solvent, solid carriers.

The the high road.  It will be a much nicer trip that way.

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