Identifying the Real Victim in Insurance Fraud
It may seem from the outside that the insurance company is always the victim in an insurance fraud; but the reality is somewhat different. According to the Coalition against Insurance Fraud, on average, every American family pays as much more than $1000p.a in the form of increased premium costs to cover the losses of insurance frauds. Furthermore, the additional cost that businesses bear in insurance is the added expenditure that’s passed onto the consumers in the form of inflated prices. Consequently, the cost of fraudulent claims is being indirectly passed onto the end user as higher premiums and increased value of goods.
However, the big question that arises is, ‘what exactly is insurance fraud?’ Is it the criminals that plot against insurance companies to extract millions of dollars or an ordinary citizen that lies just in order to obtain some extra in insurance claims than what they really ought to have? The answer is a blend of both!
To clearly identify the victims in an insurance fraud, it’s imperative to have a basic idea of types of insurance frauds. Typically, there are two kinds of frauds: Hard Fraud and Soft Fraud.
Typically, a hard fraud is conducted by an individual or a team of individuals that intentionally set out their motive to fraudulently grab money from an insurance company. The schemes that they plot can be categorized as orchestrated auto accidents, fake medical bills and even murder.
On the other hand, soft fraud is when a sincere and normal person decides to deceive the insurance company just to reduce his/her premium costs or inflate the settlement of its claim. Simple and basic lies such as veiling a speed ticket to suppress insurance costs falls under the category of soft fraud. In other cases, soft fraud is also when a person unreasonably exaggerates a claim just to earn more money from it.
It is important to understand that the purpose of developing insurance was to compensate or reimburse people; not multiply their wealth just because they were a part of the loss. It is surprising to know that many people think and believe that soft fraud is not a crime and that it’s justified. They commit soft fraud by presuming that the insurance company is raking millions of dollars by manipulating the general public. So, to get their fair share of the pie, they shamelessly commit soft frauds.
Fortunately or unfortunately, this inference is totally flawed. People must understand that the cost of these fraudulent claims is further passed onto the end-user in the form of higher premium costs. Hence, the real sufferer of an insurance fraud is the end user.
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