You need to stick to certain rules when filing a claim with your insurer to avoid any complications.
Insurance rip-offs and fraud are more prevalent than you can imagine and cost the public billions of dollars every year. Many people don’t realize that submitting a fraudulent claim can lead to consequences because insurance companies employ adjusters to investigate every claim before settling.
How Do Insurers Investigate Insurance Claims?
When an insured person or injured party puts in a claim with an insurance company, the adjuster’s first task is to open a file and investigate the claim before negotiating a settlement.
The adjuster’s task is to ensure the incident leading to the claim happened as the insured or injured party is claiming. If the incident was a car accident, the adjuster reads the written report and may even call the insured to find more details.
Thereafter, the adjuster may request official records to clarify certain points. They may also request bills for any medical treatment, proof of earnings, and in the event of property damage, proof of it.
It is part of the adjuster’s job to investigate you too. They do this by checking your insurance claims record and running a Google and social media check.
Finally, once the adjuster has collected all the information and completed their investigation, they determine the case’s value and negotiate a settlement.
What Is a Fraudulent Insurance Claim?
A fraud constitutes a claim where you tried to get compensation for damage to property, stolen property, or an injury that did not happen. You may also try to get a settlement for damage or an injury unrelated to the incident covered by the insurance in this instance.
You are liable for a fraudulently filed injury-related insurance claim in the US, even if you don’t make false representations or lie. Therefore, if you notify your insurance of an accident, you must disclose all information that could trigger coverage in the policy.
Difference Between Soft and Hard Insurance Fraud
Insurance companies are covered by the law, which distinguishes between soft and hard insurance fraud.
Soft Insurance or Opportunistic Fraud
Soft insurance fraud is the most common type of insurance fraud and arises from an inflated claim. In this type of claim, the claimant tries to get damages by exaggerating their injuries or loss. When you claim over and above for your injury or loss to get more money out of the insurance, you commit soft insurance fraud.
Hard Insurance or Premeditated Fraud
If the client of an insurance company invents a way to make a claim, this is known as hard insurance fraud. The accident is deliberate and can range from staging a theft, arson, or accident to get a settlement.
What Are the Consequences of Fraudulent Claims?
Depending on the type of fraudulent claim you may have filed with an insurance company, you may face civil or criminal consequences.
A false claim triggers liability to the insurance company. They can take the following action:
- The insurer will deny the claim you have put in and not offer any compensation for the losses associated with it.
- The insurer has the option to drop your insurance coverage, even if you never filed a claim with the company.
- Insurers can cancel your policies without notice if they suspect attempted fraud.
- A fraudulent insurance claim is also reported to the state department of insurance, which is checked regularly by insurance companies. This makes it very difficult for you to obtain insurance in the future.
- If you were awarded money and your fraudulent claim is discovered, the insurance will request the money back. If you can’t repay it, a lawsuit will ensue, and insurance can also claim costs incurred. The financial consequences can be devastating.
Punishment can vary from state to state, depending on the severity of the fraudulent claim.
- A misrepresented claim or exaggerated claim is usually a misdemeanor. The consequences are usually a fine, probation, or up to a year’s jail time. This can even result from a small lie like you saying you always park your car in the garage, but your car was on the street.
- If you have purposefully destroyed your property to put in an insurance claim, then you face a felony conviction. The results can be a hefty fine or time in jail.