Insurance Frauds that may take place at various stages are:
- Fake insurance policy
- Fake customers
- Fake declarations
- Fake claims
- Fake claimants
Insurance frauds are mainly classified as hard frauds and soft frauds
1.Hard frauds include fake auto theft, fake fire and collusion frauds. Here, the claim itself is questionable. It is said to be hard fraud when someone deliberately fakes an accident or injury or other losses to collect money illegally from an insurance company
2.Soft frauds: It is also called opportunity fraud. When a policyholder exaggerates a legitimate claim. Example: A person (insured) claims he had an expensive art that was destroyed when his house was burglarized. In real his art just consisted of prints. But these days it would be difficult as most of the insurance companies ask for proof.
Frauds in life insurance:
- Issue: Fake customer, Misrepresentation of Facts: age, health .
- Claims: Fake death claims, fake claimants.
Frauds in fire insurance:
- Fake stock/asset
- Misrepresentation of assets
- A Fake fire/burglary claims.
Avoid becoming a victim: (Precautionary steps to be taken while taking an insurance policy in order avoid being a victim of the fraud)
- Be an informed customer: The payment of Insurance premium is one of the most important expenses for most of the people. The premiums are based on the individual claims history and degree of risk involved. Higher the risk higher the premium. So it is very essential to analyze if the premium paid is worth the risk taken. It is also very important to know whom you’re dealing with that is to know your seller. Finding the physical address of the seller is very much important. With an advent of internet telephony services, it’s difficult to analyze where the seller is calling from. Detailed read through on the reviews of the company needs to be done before buying an insurance policy from them.
- Get proof of payment: Insurance premiums are recommended to be paid by cheque or money order made to the insurance company directly. Avoid paying cash to the agents. Always take a receipt for the payments made.
- Know your agents or brokers: Consumers are mostly cheated by untrustworthy agents, who have no legal existence as brokers. They discover it only when making a final claim. Thus, it is important to deal only with licensed agents or brokers. Confirm that they hold a proof licensure.
- Comparison shop: Premiums differ from insurer to insurer. The Proper comparison should be done considering all the important factors before buying the policy.
- Get a copy of your policy: Ensure you get the complete insurance policy with endorsements and declarations specifically mentioning about your coverage and its limitations within a reasonable period after your purchase.
It is very important to make any claims in case of fraud.
- Pay only for the services you have received: When a person receives medical treatment for which he is covered by a health insurance it is necessary to obtain an ’explanation of benefits’ statement listing the services for which benefits have been paid. Check it thoroughly to ensure that you are not billed for those expenses that were actually supposed to be covered by the insurance.Don’t allow the salesperson to persuade you to sign up for a type of policy or certain coverages that you are not sure you need. Take time to decide what’s right for you and see to that the policy taken does not extend beyond the amount of premium you can afford.
Note: Read your policy carefully before you sign. If you have questions, ask your agent or broker, or your insurer.