Common Types of Insurance Fraud to Watch Out For

Insurance should be a helping hand when you are facing a loss or crisis. Unfortunately, not all insurance policies, insurance companies, or insurance representatives are created equally. Many can be outright illegitimate or illegal. Nefarious providers and false claims can spike your premiums, so it’s important to be aware of insurance fraud. Here is a closer look at common types:
 
False coverage for workplace accidents
 
Many employers offer financial support when you get hurt on the job. You pay into a workers’ compensation fund so that in the event an accident happens while you’re working, you’ll have help paying your medical bills during your recovery. Unfortunately, a common fraud can involve workers’ compensation. According to FBI.gov, “Some entities purport to provide workers’ compensation insurance at a reduced cost and then misappropriate premium funds without ever providing insurance.”

Fraud on wheels
 
Car owners can perpetrate a variety of insurance frauds relating to their vehicle. According to Allstate.com, an owner can knowingly get rid of their vehicle (like through a sale), but report to their insurance company it’s been stolen. This way, the car owner gets two paydays: one from the secret sale and one from the settlement. Registering a car in a less expensive area than the actual area the driver resides and inflating the cost to fix a vehicle after it’s been in an accident are two more types of car-related insurance frauds, adds the agency. Shady fixes from so-called auto professionals that don’t actually happen such as airbags and windshield replacements not only waste your money, but they also put your safety at risk.

 
Greedy commissions
 
Premiums that are whittled down into multiple commissions until claims are left unpaid fall into the scheme of Fee Churning, according to FBI.gov. When the claims bill comes due, it often becomes the responsibility of a business that had no clue it was part of the deception. “When viewed alone, each transaction appears to be legitimate — only after the cumulative effect is considered does fraud emerge."
 
Lies in healthcare
 
Medical bills can be devastating. Even with health insurance, the cost of medical attention that falls on your shoulders can be overwhelming. And, with such a cost-churning and necessary industry, it’s a prime target for fraud. Both medical providers and patients can participate in health-related frauds. According to the FBI, providers will bill twice for one service, bill for a service that never happened, bill multiple times for one service, or say a patient received a more expensive treatment. Stealing another person’s insurance info, letting someone use your insurance, and posing as a healthcare professional to place fraudulent claims are ways non-medical personnel can commit insurance fraud, adds the agency.

Stolen payments
 
When you pay your premium to your insurance agent, you assume that money is going into your policy so you are protected in the future. Some unscrupulous agents will squirrel your premium away for their personal gain. This embezzlement is called Premium Diversion, according to FBI.gov. This type of fraud can also be executed by people posing as agents who lack an official license. They collect premiums but neglect to pay any claims, adds the agency.
 
When you invest in an insurance policy, whether it be to protect your home, health, or auto, be sure you’re working with someone you can trust. Do your research and ask questions before signing on to a new policy. Be on the lookout for signs of fraud, because even if you are not a direct victim, it could end up costing you in the long run.