Insurance Fraud Costs…and We All Pay the Price
You may have seen signs in stores that say, “Shoplifting Costs Everyone.” Some people believe shoplifting is a victimless crime, but ultimately all customers pay for shoplifting because prices will rise to make up for theft. Insurance fraud is no different.
Insurance fraud is not a victimless crime and costs the U.S. insurance industry $308.6 billion annually across all types of insurance. $45 billion of that figure is for fraud in the property and casualty insurance industry, leading to higher premiums for all policyholders.
Categories of Fraud
Insurance fraud lies, misrepresents insurance information or performs a deceptive act against an insurance company for financial gain. There are two categories of fraud: soft fraud and hard fraud. According to the National Association of Insurance Commissioners (NAIC), soft fraud occurs when a policyholder exaggerates an otherwise legitimate claim or intentionally omits or lies about information on an insurance application to get a lower premium. Soft fraud is a crime of opportunity and occurs more often than hard fraud. Hard fraud is straightforward—it occurs when someone deliberately destroys property to collect an insurance payment.
Types of Fraud
You already know you should make your passwords complicated and change them frequently, and you know why—if cybercriminals get that information, they can take over your accounts to commit fraud or theft. This is called Account Takeover, and it’s on the rise. In 2023, there was a 354% increase in account takeover attacks according to Sift Global Data Network.
Account takeover fraud can occur in the insurance industry when a fraudster steals your personally identifying information to file a fake claim against your policy. Ultimately this leaves you with a fraudulent claims history, making your rates higher and making it harder for you to get coverage in the future.
Another common type of fraud is staged auto accident fraud. According to the National Insurance Crime Bureau, perpetrators of these scams target women driving alone and senior citizens in wealthier communities and those who drive newer cars because they believe these victims will be well-insured. Common scenarios include a left turn drive down, right turn drive down, curb drive down and a swoop-and-squat. Learn about these types of accidents so you don’t become a victim.
If you know of someone committing insurance fraud, please report it by calling 888-804-4693 or online. You can remain anonymous when you submit your tip, and if you call, your call will not be recorded.