False or misleading insurance claims cost the insurance industry over $2 billion per year in Australia, losses which are unavoidably passed onto consumers in the form of higher premiums. These so-called victimless crimes are actually having a significant impact on every honest policy holder to the tune of an estimated additional $75 per year. There are many different forms in which insurance fraud can be committed. Here are some of the most common practices seen by insurers around the world.
Damaged Cars
In the event of a car accident, staged or otherwise, many people claim on their policies for damages incurred. However, not all of this money is necessarily used to pay for repairs. If a repair shop itself is involved in the scam, the overall cost of the repair work may also be inflated to allow the policyholder to claim a greater value than the accident actually caused and than the work will cost.
Stolen Cars
Cars are often sold to body shops and then reported ‘stolen’ to claim insurance. Often the body shop owner is complicit in the scam so when questioned by the insurance company, the story holds true. If the car has already been sold for parts under the table, there is no evidence of the car ever having being in the shop in the first place. Other people simply hide their cars before reporting them stolen, claim the money and then return to collect their car after a period of time has passed.
Staged Car Accidents
Whether these are orchestrated by an organised crime group or individuals who deliberately create collisions with innocent drivers, staged accidents can be very hard to prove. A popular tactic used is buying high value but poor conditioned cars for cheap prices and then insuring them for more than they are worth to claim more money. Deliberately causing an accident with an innocent driver is incredibly dangerous. These criminals drive in such a way that a collision is unavoidable and looks like the other driver’s fault. Some organised crime groups go so far as to hide their own people in the crowd of onlookers to act as ‘witnesses’ if the police are called to the scene.
Health Insurance
This fraud is often committed by healthcare professionals rather than patients. They often send patients for unnecessary procedures and overcharge them for something they didn’t even need to have done in the first place. Some doctors include billings for procedures which were never performed. In these cases, both the insurance company and the patient become victims of this fraudulent activity.
Fake Deaths
This is a rather elaborate way of committing insurance fraud but is surprisingly common, partly because of the huge pay outs involved if successful. Individuals take out a policy on their own life, naming their spouse as the beneficiary. They then ‘die’ (disappear) and as soon as the insurance company has paid out the spouse disappears as well with the money to re-join their ‘deceased’ partner.
House Fires
These are typically staged incidents before which all valuable items are removed from the property and placed into storage to enable the criminals to claim not only for the value of the house but also the ‘lost’ possessions. Alternatively, if all high value items are insured, they too can perish in the fire. Home fires are usually set up so that the rightful owner is not in the house at the time and has a cast iron alibi when the arson squad investigates. Instead they work with an unsuspected partner with whom they split the profits.
Natural Disasters
In the wake of unpredictable events such as storms, tsunamis and earthquakes, a surprising number of people will submit fraudulent claims for losses suffered. This is typically a busy time for insurance offices and as many of the claims are genuine and urgently need to be settled, they are more likely to miss phoney reports amongst legitimate ones. This is exploitative behaviour at its worse, taking advantage of human suffering and loss to capitalise one’s own gain.
Insurance companies often enlist the expert help of fraud investigators, impartial third parties who can analyse the situations surrounding claims which have piqued suspicions in an attempt to verify the validity of the claim. In the event of a fraudulent claim, criminal charges can be brought against the individuals involved and save the insurance companies paying out undue amounts.