Insurance fraud affects consumers, insurance companies, and government agencies, with a cost of $100 billion annually. The average honest consumer always loses out, whether duped by fraudulent agents or hit with increased premiums thanks to insurance fraud.
When a policyholder, insurance agent, insurance adjuster, or insurance company representative intentionally deceives to gain financially, that’s considered fraud — and it should be reported immediately.
Common Types of Insurance Fraud
Wondering what insurance fraud looks like? These are some of the most common scenarios:
- Unscrupulous agents pose as insurance company representatives to sell fake insurance policies. Similarly, agents neglect to send the policy to underwrite and just pocket the premiums.
- Bogus insurance policies leave consumers unprotected; when they have a loss, they discover their insurance policy was fake and their premiums were stolen.
- Consumers commit fraud by causing a loss intentionally, such as in the case of arson, or by faking a workplace injury or other calamity and then filing a falsified claim with their insurance company.
There are often warning signs that an insurance company is fake, or the agent is misleading the customer. Make sure your policy is legit and you’re receiving the coverage you paid for.
Tips to Avoid Insurance Fakes
- Be suspicious of agents who insist that you need to act quickly, or that your rates will go up if you don’t buy it right away.
- Avoid agents or companies whose premiums seem significantly lower than the industry standard. It’s a warning sign that something’s not right.
- Verify that the company is real by checking with your state board of insurance. They will tell you if the company is authorized to sell insurance in your area.
Always Report Insurance Fraud
It goes without saying that you shouldn’t participate in fraud. Likewise, you should report if you ever suspect it. There is a national reporting system where consumers and insurance departments can report insurance abuse. If you know or suspect unscrupulous activities, please report insurance fraud immediately.