Insurance fraud occurs when an insured person make a false insurance claim, and as a result seeks monetary compensation for false injuries and losses. So for example, if a person claimed to their insurance company that they broke their arm, but they didn’t actually break it, and sought monetary compensation for the falsely broken arm, that would be an example of insurance fraud.
The second method of insurance fraud though is actually inflicted upon customers, by selling unlicensed or fake insurance coverage to potential ‘clients’, or the stealing of insurance premiums paid by clients, most often by insurance agents or brokers. So as you can see, insurance fraud can really go both ways.
So, that appears that the definition of insurance fraud is covered, right? Well, not exactly. The true definition of insurance fraud goes beyond that. It can be committed by nearly any individual, and is performed with the deliberate intention of receiving reprehensible payments from an insurer. Many people in many different professions have been prosecuted of committing insurance fraud. These professions include insurance agents and salesmen, bankers, doctors, lawyers, etc. Anyone of any profession who seeks monetary benefit from insurance with false claims can legally be prosecuted of committing insurance fraud.
Insurance fraud doesn’t just impact the people who were directly involved. It will drastically increase the cost for all consumers in addition to costing insurance companies millions, and in some cases billions, of dollars each year. This is even made worse by the fact that detecting insurance fraud is extremely difficult because of the nature by which criminals can perpetrate the fraud. Even if someone has never committed a crime before, and even in the event that they didn’t intentionally commit insurance fraud, law enforcement officers still handle all cases of insurance fraud as a criminal case.
There are two types of insurance fraud schemes: hard fraud and soft fraud. Hard fraud is where a person intentionally fakes an accident, theft, or loss to receive money directly from their insurance company. Most often, hard fraud is committed by a single individual, but it can also be committed by large criminal organizations.
On the other hand, soft fraud is where people tell lies to their insurance company with the intention of maximizing a claim. It is often soft fraud that dramatically increases the insurance cost of everyday consumers.