Mechanics of a fraudulent insurance claim.
Before a business can engage in security to prevent insurance fraud, it is necessary to understand the mechanics of insurance fraud and how often it occurs.
Insurance fraud occurs in almost every business around the world and costs businesses, and those who pay insurance premiums, billions of dollars every year. There is no particular business that exclusively experiences insurance fraud, criminal activity can be identified in most any field of business where liability insurance is carried and intended to protect consumers.
The motive most often noted for someone to commit insurance fraud is to gain (monetarily) from some act that can be blamed on the insuring business. One form of insurance fraud committed for financial gain is for an insured person or business to inflate the value of the property that is being insured. Once the property is destroyed and the insured must be compensated by the insurance company, the insured stands to receive a larger monetary sum than the destroyed property was actually worth.
Business owners looking to obtain liability or property insurance should be wary of insurance companies who offer insurance for more than the value of the property to be protected. Often insurance companies will also benefit from over-insuring property through higher charged premiums.
Why fraudulent claims are difficult to identify.
One of the most difficult problems for businesses and insurers is the inability to accurately detect insurance fraud cases. By the very nature of the crime, it is intended to usually be subtle and well hidden by those perpetrating the fraud. The best any insurance watch group can do is to estimate the total lost every year to insurance fraud.
One of the most recent estimates, provided by the Insurance Information Institute, is approximately $30 billion dollars of loss claims paid by insurance companies in the United States can be attributed to fraudulent claims. Another estimate by the National Health Care Anti-fraud Association provides the figure of approximately $51 billion for medical claims, filed against insurance companies, attributed to fraudulent claims. Here alone is a discrepancy of $21 billion – so you can easily see why claims sometimes vary wildly.
Protecting businesses from fraudulent insurance claims.
The biggest question for companies to ask is, “How can I protect myself and my company from fraudulent insurance claims?” The answer is usually simple vigilance and common sense.
Insurance fraud, due to its prevalence in all types of businesses, is often difficult to prevent without security measures such as cameras and security personnel. Especially in businesses that have customer who enter their premises such as grocery stores, banks and commercial retail need to be vigilant against insurance fraud.
- Slip and fall claims can be one of the most difficult fraudulent insurance scams for a company to fight in court. Security cameras are an efficient method for disproving a fraudulent slip and fall claim against a business. While some may consider security cameras an expensive investment, the upfront cost can often be offset by the money saved when arguing against a fraudulent insurance claim.
- Security personnel are another method businesses can use to try to lessen the quantity and severity of fraudulent insurance claims. Vigilant, trained security personnel are an efficient way to keep an eye on customers and help deter any criminal activity at business locations. Business owners who have customers, or the general public, entering their locations on a daily basis would do well to invest in some kind of visual security. Visual security can take the “he said, she said” factor out of an insurance claim in court. Witnesses, including video, can greatly reduce the amount of insurance fraud a business has to deal with.
- Another method that can be employed by businesses to detect fraudulent insurance claims is to track all types of claims against their insurance. Research into documented fraudulent claims can assist business owners in identifying types of claims which are more prone to being inflated or “faked” for monetary gain.
Automobile insurance fraud against businesses.
There is one type of insurance claims many businesses would not know to readily identify as possibly fraudulent. In 1996, a report by the Insurance Research Council advised approximately 21 to 36 percent of automobile insurance claims were suspicious and should be considered possibly fraudulent. Business owners who depend on motor vehicles to maintain their livelihood should beware of possible fraudulent claims against their commercial automobile insurance policies.
Opportunistic criminals may find a vehicle with a company name on it a good target for a false insurance claim. These types of automobile insurance claims commonly utilize a group of people, usually in more than one car, who use stranger’s vehicles as targets for rear end collisions. The vehicle that is rear-ended is often filled with passengers who file false medical claims against the stranger’s insurance. This type of false reporting and filing of false claims often only serves to drive up the victim’s insurance rates, and can be a reason for the paying insurance company to cancel a company’s policy.
Protecting the bottom line.
No matter the type of insurance fraud claim perpetrated by criminals, businesses often end up paying thousands and thousands of dollars through their insurance. Whether it is property insurance, liability insurance or automobile insurance, it is important for business owners to be vigilant with their daily interactions.
Tracking drivers’ delivery schedules can identify potential hazards during their routes, security cameras and security personnel can disprove false damage and medical claims against a business and full research into competitive rates for their property insurance can avoid paying inflated premiums to unethical insurance agents.
It is important for all business owners to also maintain appropriate levels of insurance for their particular type of business, in order to avoid paying personally for highly inflated fraudulent insurance claims. Not only can fraudulent claims cost a company in payouts and insurance premiums, the business’ reputation can be tarnished and business lost due to fraudulent claims that become public.