How Does Insurance Fraud Hurt Consumers?

Posted June 21st, 2021 by .

Categories: Legal Topics.

Insurance fraud may seem like an offense that hurts a few when looking at the surface. However,  fraud affects the individual, the insurance company, and the entire society financially. Unfortunately, people find themselves accused of insurance fraud for a mistake or a misunderstanding when filing a compensation claim.

Contact the Bayonne Personal Injury Attorney immediately if you are arrested or charged with insurance fraud. Here are more details about insurance fraud, including its effects on consumers:

What are the different types of insurance fraud?

Insurance fraud is any act of omission or providing false information when making a claim or renewing a policy for insurance benefit purposes. Examples of such actions include arson, false theft claims, staged automobile collisions, and false invoices for services. Overall, insurance fraud is classified into three general categories:

  • Opportunistic fraud: This is when the policyholder has a legitimate claim but inflates it for financial gain. Usually, they do not plan for this act before and only take advantage of the opportunity when it arises. An excellent example of an opportunistic situation is a theft claim where the policyholder states that the thief took property they did not own previously, like a $4000 diamond ring.
  • Planned fraud: As the name suggests, the policyholder specifically plans for this act with the deliberate aim of defrauding the insurer. Examples of deliberate fraud include staged automobile accidents and arson.
  • Padded claims: A padded claim also occurs when there is an opportunity from a legitimate claim to inflate the claim and gain financial support. For example, an automobile policyholder may state that damage was caused by the recent accident when, in fact, it existed before the accident. Legally, the insurer is allowed to deny paying the claim if the policyholder issues a false statement. If already paid, they can take civil action to claim compensation for losses.

Who is affected by insurance fraud?

Insurance companies are strict about detecting and preventing insurance fraud because they suffer the most from its results. The financial loss affects their ability to pay other legitimate claims. Insurance fraud can also cause physical injury or death to private and public employees. Besides, such events cause substantial consequences to victims and their families. Consumers are also among the victims of insurance fraud.

How does insurance fraud hurt consumers?

N.D. Insurance Department reported that insurance fraud is among the most profitable crimes in the United States. Profits to the offenders result in losses to companies that are aiming to pool risks. The companies eventually require consumers to pay higher premiums in an attempt to spread their losses. Thus, the simple act that seems victimless affects more people, including innocent ones.

Work with an experienced attorney.

Due to the severity of insurance fraud, offenders face a risk of years in prison or substantial fines. Therefore, you must work with an experienced defense attorney when faced with such charges. They will reduce the charges or have them dismissed entirely, especially if it was a mistake or misunderstanding. Call the offices today at 201-733-2230.

Call Today! (201) 963-6000

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