How Insurance Fraud Affects Us All
The first thing to keep in mind is that fraud is not a victimless crime. Each insurance company’s book of business is a pool of risks, and the riskier the book, the higher the premiums. In other words, all insurance policyholders bear the burden of higher rates when a fraudulent claim is detected.
For example, if your neighbor is committing fraud and you don’t report it, your insurance premiums could rise when it is time for your renewal – even if you don’t use the same insurance company! According to Lynne McChristian, Florida’s representative for the Insurance Information Institute, “People who commit this type of fraud may think it’s harmless, but insurance fraud is a crime we all pay for.”
Types of Fraud
Below are some scenarios to help you identify a fraudulent claim:
- If a roofing contractor claims he can get your insurance company to pay in full for your new roof or offers to cover your deductible without informing your insurance, they are likely attempting to commit fraud. If you let a contractor overbill your insurance company for any reason, it counts as insurance fraud.
- If a public adjuster inflates claims estimates to increase their fees, it is insurance fraud. If you hire a public adjuster, it is imperative that you make sure he is completely honest with your insurance company.
- If a water mitigation company coerces its policyholders into forfeiting their rights under the policy before estimating damage, it is insurance fraud. These companies inflate the costs of preventative measures or repairs to your home so that your insurance company pays them more.
- If a plumber submits fake photos of pipe blockages/leakages from other homes to your insurance company, it is insurance fraud. Your insurance company will overestimate the damage done to your home, and will pay more money to cover the repairs than is necessary.
- If you submit invoices for services that were not provided or charges not incurred, it is insurance fraud. If you submit invoices for services provided by non-eligible providers, such as family members, it is also insurance fraud.
- If you receive an insurance payment but do not fix the damage, it is insurance fraud.
- If you lie on your insurance application by claiming to have items in your home that you don’t have, like a dog or a pool, it is insurance fraud.
It’s important to be aware of the different types of fraud and to make sure that your contractors are trustworthy. If you or a contractor is discovered for committing fraud, your insurance company could withdraw their coverage. Any subsequent insurance will be harder to find and more expensive because you have become a higher risk client.
We All Suffer From Fraud
The high number of illegitimate claims appears to be linked to public perceptions of fraud. In a recent poll conducted, the Insurance Research Council found that people increasingly think that it is okay to file insurance claims to account for their deductibles. In this survey, 24% of respondents said that it was acceptable for people to pad their insurance claims.
It may be easy to think that fudging a little is not a big deal, but if one person files a fraudulent claim, all policyholders end up shouldering the cost. If you detect fraud or suspect you may be a victim, contact the Florida Division of Fraud, where you can report bogus contractors anonymously.
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