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What is Insurance Fraud?

by | Aug 15, 2022 | Blog |

Insurance fraud occurs when someone files a false claim towards an insurance company to obtain a benefit they are not entitled to. Insurance fraud is a serious crime and can potentially victimize every resident in the state of Alabama if the opportunity were to rise. This type of fraud costs residents millions of dollars each and every year in the form of increased premiums and high prices for goods and services.

For example, the cost of insurance fraud is estimated to be more than $40 billion per year. That means it costs the average family in the United States roughly $400-$700 per year in the form of increased premiums. 

So, let’s review the basics before delving further into insurance disputes and insurance fraud.

What are Common Forms of Insurance Fraud? 

There is no single form of insurance fraud. Insurance fraud, like many things, takes several forms, because no form of deception appears the same as the last. Some of the most common forms of insurance fraud include the following:

  • After a wreck, a driver and body shop worker inflate the automobile damage claim and agree to share “the profit.”
  • A homeowner falsely submits a claim that his home has been burglarized and valuables were stolen. 
  • An employed and able-bodied worker is collecting workers’ compensation benefits. 

When Can Insurance Fraud be Prosecuted?

The crime of insurance fraud can be prosecuted when the following are true:

  • The suspect accused of insurance fraud must be found to have the intent to defraud. According to the law, insurance fraud is a specific intent crime, meaning a prosecutor must prove the suspect knowingly committed the act to defraud. 
  • The act must have been committed for one to be charged with insurance fraud. For this to be proven, a misrepresentation, either written or oral, to an insurer with false information is sufficient evidence. 
  • The act and the intent must come together because one without the other is not a crime. 

How to Avoid Becoming a Victim of Insurance Fraud

As a consumer, there are several steps you can take to minimize your risk of becoming a victim of insurance fraud and reduce its impact. 

  • Be informed. Insurance premiums are a significant expense and they are based on your individual claims history as well as the degree of risk. The greater the risk, the higher your premium. For example, a theft premium for a Toyota Corolla may be higher than a Chevy Truck due to the fact that Corollas are among the most stolen cars in America. 
  • Know who you are working with. Consumers can be victimized by fraudulent agents or brokers, causing them to find they are without coverage after filing a claim. It is important to know who you are working with and to do research on your agent or broker to ensure they are licensed and legitimate. Remember, if you are left without insurance when a disaster strikes, you are solely responsible for any damages or outcomes. 
  • Get a copy of your policy. After completing your purchase, you should receive a copy of your insurance policy complete with declarations outlining your coverage and its limitations. If you do not receive this document, please contact your agent or broker as there is no responsible explanation for the delay in receiving this documentation.

If you have any questions involving insurance fraud, or you have been a victim of a fraudulent insurance claim, please contact Holman Law Firm today!

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