There are various types of insurance fraud that’s why people must know how to spot them and prevent the fraud from happening. By contacting your local state department for insurance, you can secure yourself from paying high premiums. Below are 5 types of insurance fraud that you must be familiar with:
1. Figure out what creates insurance fraud. A person who is involved in insurance process is a candidate of creating insurance fraud, whether it’s the insurance company, an insurance claims adjuster, an agent or a consumer. For better understanding, insurance fraud happens when one person or entity purposely cheats another person for an unlawful intention. This occurs everywhere in the pipeline of insurance process—from purchasing and utilizing insurance to the deeds of underwriting and selling the insurance policies.
2. Understand the various kinds of premium diversion. Once insurance premiums get misused, it becomes one main reason for insurance fraud. Basically, premium diversion occurs if a trusted insurance agent receives the premiums for his personal gain—without the need of passing them to the underwriter. It only means that the insured person knows he’s paying his premium without knowing that the amount paid is diverted.
3. Learn about the impact of insurance fraud. Each year, the estimated total value of insurance fraud goes beyond $40 billion. Most of such costs have been passed along to clients since insurance firms need to increase premiums to every policy to cover the incurred losses caused by fraudulent doings. Because of this, an estimated cost for the additional premium each year reaches to $400.00 to $700.00.