Insurance Frauds

When someone files an illegitimate claim with an insurance company, he or she is committing an insurance fraud. In 1993, fraud investigators staged several bus accidents in New Jersey disguised as the passengers. Later they came to know about hundreds of claims from people who jumped onto the buses after the accidents or simply drove by the location and claimed coverage saying they got injured. Measuring and preventing insurance fraud is an elusive task and no single agency can do this alone.

Natural disasters can bring about an individual's ruin, if he or she lacks a firm financial footing. Insurance acts as a helpful prop to the unfortunate individuals who suffer losses after a natural disaster. Superstorm Sandy, the recent one in the list of calamities, has caused enough damage so that people are rushing in to file their insurance claims. Fraudsters wait to take advantage of this kind of situations. They wait to get the most out of the desperate individuals who might have just incurred heavy losses.

Insurance companies offer financial protection to the policyholders. In spite of all the precautionary measures and underwriting rules, the insurers themselves fall prey to the insurance frauds and end up paying for the inflated claims. Reports suggest that insurance frauds cost the industry more than 10 billions of dollars per year.

The Federal Bureau of Investigation has finally decided to put a stop to the insurance frauds, which are reportedly on the rise nowadays. The Insurance Information Institute has revealed that the US insurance industry pulls together a total of $1.1 trillion or more each year, in the form of premiums. A large chunk of it is gobbled up by the fraudsters, amounting to around $30 million.

The consequences

Well, since somebody has to provide for the extra costs. Who else than the naive consumers?

Car insurance has become an absolute necessity with more and more cars plying on the road today. With more cars, there has been an upsurge in the number of fraud cases. Auto insurance fraudsters will either report false damages to their carrier or will exaggerate the worth of damages to gain more in terms of compensation from them.