It can be a difficult task for insurance companies to stay in the black with a constant onslaught of claims and lawsuits to defend against. It can be even more difficult when an insurer has to identify and investigate cases of insurance fraud.
It can be helpful to understand that types of fraud and steps to take to resolve a fraudulent claim.
What is insurance fraud?
Insurance fraud occurs when a person, group or company deliberately deceive an insurance company. They do this to get money that they are not entitled to. Insurance fraud is illegal in all 50 states. Charges vary from misdemeanor to a felony.
There are two types of insurance fraud: soft fraud and hard fraud. Soft fraud is when a policy holder exaggerates the amount of damage that were sustained. This is more common with motor vehicle accidents. Hard fraud is a fabricated claim. An example could be a person setting fire to their own business in order to collect the insurance money.
According to the Federal Bureau of Investigation (FBI), non-health insurance insurance fraud is estimated to be more than $40 billion per year. Fraud costs insurers and consumers money. These costs are represented in higher premiums. Every year in the United States families pay between $400 and $700 in increased premiums due to fraud.
What it takes to prove insurance fraud
Insurance company personnel are specially trained to recognize discrepancies, detect fraud and investigate claims. Once an inconsistency has been determined, three things must be proved. According to Florida Statute 817.234 these three things are:
- That the error was made knowingly, with intent.
- The false or misleading information was made in connection to a claim that would engender a payment to be made under the terms of the insurance policy.
- The misinformation or inaccuracy was submitted in order to attain monetary gain.
All three elements must be proven beyond a reasonable doubt. There are situations where a policy holder may say or communicate things that are not accurate. This is not necessarily fraud.
Who are the attorneys for insurance companies?
Attorneys who work in insurance defense can work for an insurance company or a law firm. In some instances, an attorney may represent a policyholder. For example, if a driver sues a policyholder for damages.
An insurance company may also use an attorney to review contracts and practices. Every insurance company must comply with state and federal regulations. In most cases state law governs insurance companies. In every case the attorney who works on an insurance defense case is a member of the community: a fellow parent, a neighbor or even a friend.