Insurance fraud is a billion-dollar industry in this nation, so insurance companies have reason to be wary of many of the claims that they receive.
Industry experts say that there are two main types of fraud they see among consumers — hard and soft. Here’s what that means and what red flags you can spot.
The 2 basic types of false insurance claims
“Hard” fraud is often simple, as there is no real damage and the claim made to the insurance company is entirely false. For example, maybe a homeowner reports he was robbed — but the expensive electronics and jewelry he lists on the insurance claim never even existed or were sold by the homeowner at the local pawn shop.
Or, alternatively, the damage was all self-inflicted. For example, maybe a business owner is facing mounting financial problems, so they try to use arson to do just enough damage so that they walk away with a big insurance check.
So, what’s “soft” fraud? Soft fraud involves an exaggerated claim for damages after a very real incident. Perhaps the homeowner really was robbed — but they lost nothing more than their television and gaming system. On the insurance claim, however, they throw in a fictional list of other items that were also supposedly lifted in the theft.
With soft fraud, you may also see multiple entities involved. For example, there are unscrupulous chiropractors who routinely comb car accident reports and look for victims who need “treatment” for back pain — despite the fact they weren’t actually injured in their recent fender-bender.
When something feels off about an insurance claim, don’t hesitate to look deeper
When the insured party has a long, complicated claims history, seems vague on the details about what happened, has an unreasonably large list of damages or seems to be absolutely desperate for payment, that should prompt closer inspection of the veracity of their current claim.
When litigation erupts over a denied insurance claim, make sure you take aggressive action to protect your reputation and your bottom line.