Insurance Fraud: the Crime That Happens to Everyone

Insurance fraud is frustrating. Even if it isn’t happening directly to you, you’re still affected through higher premiums because of fraudulent claims by others. The worst part is, insurance fraud is almost impossible to prevent ahead of time. Protecting yourself means watching out for common types of insurance fraud and knowing how to deal with them.

Car insurance fraud is one of the more common types, costing about $200–$300 per year extra on your premium. The number of people involved when it comes to car insurance claims is partly why it’s so common: drivers, shops, insurance adjusters, and agents—all of them can be the source of fraud. Here are a few common scams to look out for and how to prevent them.

• The Problem — It isn’t uncommon for drivers to claim extra damage to their vehicle. Or new injuries to themselves or passengers (sometimes fake ones) on car insurance claims.

• The Solution — Always take photos of your vehicle and any others involved in the accident. Even if it’s a small fender-bender with no visible damage, call the police to file a report—it’s their job to prevent crime, after all. The more of a paper trail you can create, the less room there is to commit fraud.

Health insurance fraud steals upwards of ten billion dollars a year. Although health insurance fraud is unlikely to happen to you, it could.

• The Problem — If you go in to the doctor for what you suspect is a sprained ankle and your doctor starts ordering blood tests, this could be a scam. Although doctors being in on the scam is rare, it does happen. The common forms of fraud are ordering extra or unnecessary procedures and tests or billing a simple check-up as something more expensive, like an in-office surgical procedure.

• The Solution — Get a second opinion from another doctor if you feel you’re being told you need procedures that don’t make sense. Talk to your insurance company before you pay any co-pay or bill for a procedure that doesn’t make sense.

Homeowner’s insurance fraud is common, too. Sadly, a lot of people take advantage of insurance companies after major disasters, when the insurers are overwhelmed with claims.

• The Problem — A terrible storm rips through your area, damaging hundreds of homes. Your neighbor, whose house sustained little or no damage, is making costly upgrades or buying expensive things. You suspect they used the large number of claims to hide a false claim.

• The Solution — You’re probably not going to have your own proof of fraud like you would in a car accident. Taking photos of your neighbor’s house would be strange and could put you in an uncomfortable position once an investigation starts. The best option is to call the National Insurance Crime Bureau at 1 (800) 835-6422. The NICB is a non-profit organization that works to investigate insurance fraud of all kinds. It’s particularly helpful with homeowner’s insurance since you’re not directly involved and, short a lot of effort on your part, you’re lacking a lot of information.

Sometimes the fraud is a direct crime against you without a fake claim or trumped up damages involved. Sometimes it’s shady agents or insurance companies straight up stealing from you. Anything from fake insurance to over-charging and pocketing the difference are scams that can happen before you even file a claim.

• The Problem — The price your agent told you upfront is much higher than what is on your bill, and your agent insists the bill is wrong. This is Premium Theft. Another problem is fake insurance companies. These can be hard to spot because they can dazzle you with paperwork.

• The Solution — If your agent is demanding more payment than the bill requires, contact their supervisor or the main service number for your insurance provider. If you suspect an insurance agent or company is completely fake, ask around and do some research. Remember, you don’t have to do business with someone you don’t feel you trust, especially an insurance company. In both cases, contacting the NICB is a good idea.

Even if it isn’t a crime directed against you specifically, insurance fraud is costing you money every day. If you feel you are being scammed or that you have witnessed fraud, report it. Contact the NICB or local law enforcement. It hurts everyone, so it is everyone’s job to be on the lookout.