"Why My Insurance Fee Increased?" - Insurance Fraud Impact
Generally, insurance fraud activities, from exaggerating claims to deliberately
causing accidents or damage, affect the lives of innocent people, both directly
through accidental or purposeful injury or damage, and indirectly as these crimes
cause insurance premiums to be higher.
Insurance fraud loss is estimated per year to be $27.6 billion: Insurance fraud,
the white collars second most costly offense, costs the American public approximately
96.2 billion dollars per year in increased premiums alone. A study in 2001 by Conning
and Co. estimated that insurance fraud increases the average American household
costs by over $5000.00/year when the rise in premiums, goods and services are taken
into consideration.
What is Insurance Fraud?
Insurance Fraud - The intentional misrepresentation of material facts and
circumstances to an insurance company to obtain payment that would not otherwise
be made.
- Soft Fraud refers to policyholders exaggerate
the legitimate claims.
- Hard Fraud happens when the policyholders
deliberately invent a loss, such as a fire, an
auto accident, or even a death, that is covered
by their insurance policy to collect money
illegally from an insurance company.
"All around Our Life" - Insurance Fraud Classification
Medical Insurance Fraud
Medicare lost $11.9 billion to waste, fraud and mistakes in 2000; half of what was
lost five years ago from improper payments to doctors and hospitals. U.S. Department
of Health and Human Services (2001)
Seniors and other taxpayers pay up to $1 billion a year in inflated drug prices
due to potential fraud and loopholes in Medicare. The overpayments represented 1/5
of Medicare spending in 2000. Government Accounting Office (2001)
Property Insurance Fraud
According to estimates by the Insurance Information Institute, insurance fraud accounts
for 10%, or about $30 billion, of losses in the property and casualty insurance
industries in the United States Property insurance fraud occurs mostly because policyholders
can obtain payment that is worth more than the value of the property destroyed.
The majority of property insurance crimes involve arson.
Automobile Insurance
Auto insurance fraud always includes organized fraud crime. Organized crime rings
in New York City .This practice has caused the cost of claims in New York City to
raise by 32.1% in 2006, as opposed to only a 4.5% increase in 1998. Organized gangs
involving recruiters, car "passengers," doctors, medical clinics, lawyers are involved
in many of the largest staged-accident crimes. The gangs lure motorists into crashes,
crash their own cars into each other, or invent "paper" accidents that never happened
in order to make large volumes of bogus injury claims. These rings are widespread
in several areas of the US, and often involve immigrants as street-level operatives.
Many states have passed laws and regulations targeting staged-accident rings, and
some have formed taskforces, hired special prosecutors and deployed other resources
to shutting down the rings.
Life Insurance
The cheater may murder the policyholder to get payment from insurance company; or
the policyholder may try to prove death to get payment. People will fake their deaths
so they and their families can collect large life-insurance settlements.
These scams often are committed by foreign nationals living in the U.S. A family
member suddenly "dies" while "visiting" relatives in his or her native country -
typically a Third World nation. The schemers may bribe local bureaucrats to issue
phony death certificates and other documentation. They might even videotape mock
funerals and create fake grave plots to support the phony insurance claim. Continued
immigration to the U.S. makes this a persistent and costly crime.
Healthcare Insurance
One reason for health care insurance fraud is that the historically prevailing attitude
in the medical profession is one of fidelity to patients. Another motivation for
insurance fraud in the healthcare industry is a desire for financial gain.
For example, some physicians use several fraudulent techniques to achieve this end:
Billing for more expensive treatments than those actually provided; providing and
subsequently billing for treatments that are not medically necessary; Scheduling
extra visits for patients; referring patients to another physician when no further
treatment is actually necessary; Billing for services to family members or other
individuals who are accompanying the patient but who did not personally receive
any services.
Dishonest dentists will pull teeth, do root canals and drill cavities for people
with perfectly healthy teeth.
These dentists hike their own insurance billings
by charging insurers for painful, unneeded and invasive surgeries that often are
botched and require more surgery to correct. Sometimes dentists charge insurers
and government health programs for surgery and other treatments they never performed.
They may also inflate bills by disguising routine procedures such as tooth polishing
as more elaborate and expensive work. Dentists also are increasingly involved in
drug diversion schemes.
Difficulties & Anti-Fraud Efforts
Due to the hidden nature of this crime, it's difficult, if not impossible, to accurately
measure the amount of fraud. Much fraud goes undetected, although more people are
getting caught all the time. Even when detected, a lot of fraud goes unreported.
The lack of uniformity in reporting requirements and systems from state to state
make the task of gathering good statistics that much harder.
- Criminal convictions increased 31 percent.
Coalition Against Insurance Fraud (2004)
- Cases presented for prosecution rose
14 percent.
Coalition Against Insurance Fraud (2004)
- Investigations initiated increased
by nearly 18 percent.
Coalition Against Insurance Fraud (2004)
- Referrals of suspected fraudulent actions
were up 4.5 percent.
Coalition Against Insurance Fraud (2004)
- As Reported by State Insurance Fraud
Bureaus 2007 (statistics are aggregate)
Works Cited
