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Concept
Insurance fraud
Summary
Insurance fraud is any act committed to defraud an insurance process. It occurs when a claimant attempts to obtain some benefit or advantage they are not entitled to, or when an insurer knowingly denies some benefit that is due. According to the United States Federal Bureau of Investigation, the most common schemes include premium diversion, fee churning, asset diversion, and workers compensation fraud. Perpetrators in the schemes can be insurance company employees or claimants. False insurance claims are insurance claims filed with the fraudulent intention towards an insurance provider.
Insurance fraud has existed since the beginning of insurance as a commercial enterprise. Fraudulent claims account for a significant portion of all claims received by insurers, and cost billions of dollars annually. Types of insurance fraud are diverse and occur in all areas of insurance. Insurance crimes also range in severity, from slightly exaggerating claims to deliberately causing accidents or damage. Fraudulent activities affect the lives of innocent people, both directly through accidental or intentional injury or damage, and indirectly by the crimes leading to higher insurance premiums. Insurance fraud poses a significant problem, and governments and other organizations try to deter such activity.
An epigram by the Roman poet Martial provides a clear evidence the phenomenon of insurance fraud was already known in the Roman Empire during the First Century AD:
"Tongilianus, you paid two hundred for your house;
An accident too common in this city destroyed it.
You collected ten times more. Doesn't it seem, I pray,
That you set fire to your own house, Tongilianus?" Book III, No. 52
The "chief motive in all insurance crimes is financial profit". Insurance contracts provide both the insured and the insurer with opportunities for exploitation.
According to the Coalition Against Insurance Fraud, the causes vary, but are usually centered on greed, and on holes in the protections against fraud.
Official source
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