Stopping Insurance Fraud

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.

preventing insurance fraud

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.

One Response to Stopping Insurance Fraud

  1. David says:

    My neighbor is a seriously disturbed, mentally ill, violent individual who has no income and preys on his neighbors and others in order to collect from the insurance policy that covers my H.O.A. He has attacked many people in the past because the Associations policy includes personal injury liability coverage. So he attacks people and claims they were at fault.
    This has been going on for years. i am his most recent victim. However there are only 4 units and 4 owners in my H.O.A. One of the other owners is the President of the H.O.A. and has totally mismanaged and embezzled from the Association. As a result he has conspired with my other neighbor to destroy me. the President does not want me to expose him for his crimes and the other neighbor is simply desperate and seriously disturbed.
    They have plotted against me and when I was attacked by my crazy neighbor, the President of my H.O.A. supported him by saying I was at fault. As a result he got personal injury attorney to take the case on contingency as they expected I would file a claim with the Association’s Insurance policy and they would win a settlement.
    My Insurer did cover me for my defense, but they also insure the other two individuals because they are on the Board of Directors and covered for $2,000,000 each. since the President is a witness against me, I managed to persuade my attorney, who is Panel Counsel for my insurer, to hire a forensic accountant to prove the President embezzled from my Association which is his motive for testifying against me. The Accountant uncovered massive evidence to support this.
    In addition I have forced my attorney to thoroughly investigate my neighbor who is suing me. About $80,000 has been spent to depose many doctors, who have all testified that none of my neighbors claims are genuine and that he is in fact faking his injuries. Further we have obtained all his medical records and have uncovered a tremendous amount of evidence that he has a long history of this type of behavior, including another personal injury claim in which he also lied and received nothing. in addition he uses these false injuries as a means to acquire prescriptions for Oxy Contin, which he has been reported for suspicion of selling.
    There is an enormous amount of evidence and deposition testimony from people he has attacked, including an incident where he told a one year old girl to jump off a balcony because she was the daughter of his former neighbor who I purchased my home from. He preyed on her and her family, just as he has with me.
    despite the enormous amount of evidence I have to disprove all of the claims against me and even though it is very easy to prove he has lied about what happened, my insurer wants to settle the case.
    I have developed evidence that proves the President of My H.O.A. and my other neighbor, who is suing me, have conspired against me to prevent me from exposing them for their crimes. As a result, if the case were to go to trial, it would fully develop this situation and very possibly lead to a claim against my Board of Directors which my insurer would have to defend. therefore they do not want this to happen.
    For the first 14 months, I was defended by my insurer’s captive law firm and they knew I would never agree to settle the claim. In addition it took 14 months until I finally filed a complaint with the Department of Insurance because they would not take a position on their reservation of rights. As a result they did Reserve their Rights and I requested Independent Counsel, but they denied me this right. Next they hired their Coverage Counsel to cite the cooperation clause in the policy to intimidate me into substituting in their Panel Counsel and insisted it was to prepare my case and take it to trial, but the real reason was to remove the case from their Captive Law Firm. They knew I would never settle the case and that this would lead to me loosing my coverage, so they needed to have me represented by their Panel Counsel, not their Captive law firm or it would be an issue for them.
    The plaintiffs attorney informed my first attorney he wanted to settle the case two years ago, but my lawyer knew I would not agree, so my insurer would not discuss a settlement at that time. However now that two years have passed and I am being defended by their panel Counsel and $80,000 has been spent on my defense, they have informed me that in less I release them from my defense they will attempt to settle the claim. They have not yet entered into settlement discussions and thus can not tell me whether or not they will in fact reach a settlement or take it to trial. They merely inform me that if I do not release them from my defense beforehand, I will not have another opportunity to do so. Obviously the plaintiff will accept a settlement because they have no chance of winning at trial. However they have done nothing at all to prepare their case for trial and have not even taken my deposition. There has been no new developments in their case against me and therefore no reason why my insurer could not have tried to settle the case two years ago. The only real reason is because they knew I would not agree to do so and I was being represented by their Captive Law Firm at the time. Also because the person suing me and his witness against me are the President and Vice President of my H.O.A. and the only two people on the Board of Directors, my defense would create a claim against them which my insurer would have to defense and they are insured for $2,000,000 each per incident.
    I have recently released my insurer from my defense by signing the agreement and will loose my coverage on January 17, 2011. I simply can not allow my neighbor to profit by attacking people and lying about it. He is a serious danger to the community and has been for a long time. Something needs to be done, but my insurer does not care.
    My attorney has done everything possible to see to it that the case gets settled and has intentionally interfered with my defense to prevent me from developing evidence against my Board of Directors. We have been at odds from the very beginning and I told him from the start that the only reason I was substituting him in as my new attorney was because I was received letters from my insurers coverage counsel and felt they were threatening to drop my coverage for not cooperating.
    I would greatly appreciate any assistance in this matter. I feel I have a strong case for bad faith, legal mal practice, and a case against my Board of Directors.
    David Soffer

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