All You Need to Know About Insurance Scams
Insurance scam involves the misuse of insurance policies or contract exploitation to gain illegal financial benefit. Check out https://www.insuranceandestates.com/top-16-best-whole-life-insurance-companies/ for more insurance information.
Types of Insurance Scammers
Insurance scams include fraud from either the insurer’s or the insured’s side. Cons from the insurer’s side comprise selling non-existent companies’ policies, failing to submit the premiums on time or no submission at all, and roiling guidelines for extra commission creation.
Deceit from the buyer’s side comprises cases like viatical artifice, false medical history, an exaggerated claim, overdue policies, a fake death or abduction and, murder. The majority of insurance scam cases are said to involve exaggeration of claims. In contrast, cases like faking a departure or kidnapping and murder are sporadic.
Types of Insurance Scams
As mentioned earlier, the scam can be from either side. Let’s discuss the types of scams a buyer or seller may commit.
Insurer Side Scams
The most common types of insurance company deceits include fee churning, asset division, and premium diversion. Details of these types are mentioned below:
1. Premium Diversion:
This is when a non-existent company sells their insurance without a license. Such companies do not pay the claims after selling the insurance.
2. Fee Churning:
This happens when intermediaries are involved. They trick the buyer into paying a commission that ends up diluting the initial premium. This is done, so there is nothing left to pay for the claims.
3. Asset Diversion:
This is the theft of insurance company assets. Borrowed funds from a company are used in purchasing an insurance company. The assets of the acquired company are then sold off to pay the debts.
Insured Side Scams
Illegal funds reaping from insurance companies can take various forms. Let’s have a look at the scams from the buyer’s side.
1. False Claims:
False claims are the most common type of deceit from the buyers’ side. This involves claiming an unfortunate incident that never occurred or was staged. Slip and fall is a very common type of false claim. An accident or injury is faked to gain financial benefit. Other types include vehicle damage, business loss, and property damage.
Sometimes vehicle owners with the car outright damage their cars on purpose and make an accident claim to receive a payout. After getting the money, they will get their vehicle fixed inexpensively or never get it repaired at all.
Property owners scam the companies by damaging the property on purpose to claim insurance. Business owners suffering a significant loss can fake investment and make an insurance claim.
2. Inflated Claims
Unfortunate happenings like natural disasters increase inflated claims. When an area is affected by a natural calamity, many scam artists also come along to make a buck off the insurers. Scammers even deceit the companies through high billings for house repairs with good quality material, which is then replaced by moderate to lower-quality materials.
3. Fake Departure
It is a scarce type of insurance fraud. The policyholder will fake their or a loved one’s death to receive the insurance money.
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