Insurance fraud continues to be a major issue. It impacts every insurance company and virtually every customer as insurers increase premiums to offset fraud losses. The general consensus is that suspicious activity is increasing and the tactics used by fraudsters are more sophisticated.
So what constitutes insurance fraud? Insurance fraud happens when an individual or a group of persons deceives an insurance provider to get some money. They do this with full knowledge of the act and can be very resourceful when fabricating or exaggerating a claim.
Because insurance fraud can occur in so many different ways and may involve a wide range of participants, protecting yourself from it needs more than just common sense. You’d have to know the tell-tale signs of insurance scam so that you can proactively avoid falling for it.
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Trick No. 1: They follow global market trends.
Like any smart businessmen, insurance fraudsters are always alert to trends. Are the nouveau riche in China thirsting for luxury cars? No problem; organized fraud rings have built a veritable pipeline to the Asian black market.
Trick No. 2: They take advantage of the vulnerable.
Whether it’s disaster-stricken homeowners desperate to put their world right again or immigrants unclear on the ways of insurance, fraudsters prey on the vulnerable. Scammers also love to take advantage of people who’ve been hit with a natural disaster. Unlicensed and incompetent contractors descend on catastrophe-devastated areas and lure traumatized homeowners into signing contracts.
Trick No. 3: They make it happen on paper.
Emulating white-collar criminals, many staged-accident fraud rings bypass the dangers of “real” fake accidents altogether and instead make everything happen on paper, with fake passengers, fake injuries and fake treatment. Simply inventing medical treatment records of imaginary crashes increases the crook’s control and lessens the likelihood of being busted.
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Emerging Insurance Fraud Trends
Fraudsters are highly adaptive and continually change tactics, strategies and even modes of operation.
In past years, most schemes seemed focused on false auto thefts and property arsons. Fraud schemes today have shifted much more to bodily injuries and suspicious activities by medical providers. Workers compensation and auto insurance most notably have seen these changes in tactics. In response, insurers increasingly are adopting advanced analytics to counter the changing nature of fraudulent activity.
One growing challenge is rising point-of-sale or underwriting fraud to illicitly reduce premiums.
Fraudsters can test system thresholds by filing many different applications online and manipulating rates by changing rating factors to reduce premium. In addition, analysis suggests that a significant amount of claims fraud is perpetrated through illegally obtained policies. By shifting from a reactive to a more-proactive posture, insurers are reducing fraud at policy inception, and are denying rate evaders a chance to file false claims once the ill-gotten policy is in force.
Cyber fraud is another emerging threat insurers are facing. Insurers collect a large amount of personal information that identity thieves aggressively seek. The number of companies reporting attacks has increased significantly since 2012. Yet, only 14 percent of insurers now employ technology to prevent cyber fraud, according to the current survey. That number is expected to significantly rise in the next few years
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SOURCE: http://www.insurancefraud.org
SOURCE: http://www.sas.com
