Fraud by Consumers
When people think "insurance fraud" they imagine people causing fake accidents, or filing death claims for people still alive. But what about inflating the costs of an item stolen from your home? Or registering your car in the neighboring town because to get lower rates? These are examples of "soft fraud," which cost Americans billions of dollars a year in premium hikes. Meanwhile, the insurance industry -- poorly regulated in many states -- cheats the public again and again.
Pervasive -- and Accepted
Insurance companies have teamed up with law enforcement to start cracking down on instances of soft insurance fraud. Recent polls suggest that over 25% of people believe it is acceptable to inflate insurance claims, and a third of the respondents said that it was alright to pump up the claim to cover the deductible that is supposed to be paid out-of-pocket. Public opinion survey by the Coalition Against Insurance fraud finds different levels of tolerance and rationale for soft fraud.
Enforcement
Most of the responsibility for prosecuting insurance fraud rests with state agencies. A study by the Coalition Against Insurance Fraud provides an overview of growing state efforts to crack down on fraud, resulting in twice as many cases.
Estimating that 11 to 30 cents of every dollar of insurance claims are lost to soft fraud, Arizona began citing violators, hoping it will change attitudes about this "victimless crime.”
Fraud by Providers
Insurance companies are among some of the most loathed companies in America -- and for good reason. They have a long history of not paying legitimate claims, overcharging customers, and ripping off consumers in other ways. Too often, regulators and law enforcement agencies that should be cracking down on these practices stand by and do nothing -- either because of a lack of resources or because they have been cowed and coopted by one of the most powerful industry lobbies in America.
Auto Insurance Cases
State Farm has a nice image, but has reportedly engaged in a number of abuses, such as withholding payments due to its customers in Arizona.
Life Insurance Cases
Many respected life insurance companies have been accused of fraud and abuses, and reports suggest that the trend is on the rise. In the most extreme cases, survivors expecting a policy payout to live on find that, in fact, they are getting much less than expected, or nothing, because of deceptive practices. Less extreme have been the ways that life insurance companies may withhold funds for a period to get interest on the money that should belong to survivors, as happened in the notorious case involving soldiers killed in combat in Iraq and Afghanistan.
Home Insurance
Home insurance has been another place to bilk consumers.