Introduction
As insurance subscribers, you must understand different types of insurance scams. One service provider’s scam or fraud can impact the overall brand name of the industry.
And, it is the hard-earned money of consumers who accumulate their savings and levy premium subscriptions for an insurance policy. Therefore, insurance members must understand what insurance scams are. This way, they are not over crashed with fraudulent policies.
On this note, let us understand what insurance scams are and discuss ways and means to detect them and prevent getting into scams.
What are Insurance Scams?
Life Insurance scams refer to the illegal set of activities that happen within the insurance industry. These frauds or scams are committed by policyholders as well as by insurance companies on the whole.
Policyholders indulge in the extortion of subscription funds by making falsified claims to insurance companies. While scam insurance companies sell fake policies to subscribers. Therefore, insurance fraud can be committed by companies as well as policyholders on the whole.
Other factors that fall under the category of ‘insurance scams’ can be:
- Skipped premiums from policyholders
- Falsified policy disclosures as revealed by firms to individuals/ stakeholders
- Oversale of policies under new names by insurance agencies aimed at earning extra commissions
- Fake medical reports issued by policyholders to enhance the value of hospital claims
- Fake deaths/ kidnappings to extort lumpsum policy coverage amounts from insurance companies
- Insurance agencies selling backdated policies
- Furnish of wrong info or take the same policy under multiple names just to get coverage amounts under different names, etc.
Insurance Scams – Types Explained
These are the types of insurance scams you have in the insurance industry. Helping you on a run-down into the same:
1. Fake Claims
You must be on the lookout for misleading claims exaggerating claim amounts or providing false details to trick insurance service providers. When policyholders provide misleading claims to insurance companies, the firms can incur significant losses on account of the same.
As an insurance service provider, you must view the claim from all its angles indeed. You must keep track of policy documents to know what benefits are covered under a coverage scheme. At the same time, you must keep a detailed note of medical bills that have been received by the insurance subscriber, address or verification details, and other vital factors handy before you process claim requests.
2. Made – Up Crashes or Unreal Accidents
Insurance subscribers usually fabricate accident staging set-ups or fake injuries to get money from insurance service providers. Sometimes, they even fake fatal accidents to get coverage amounts in lieu of their nominees. These are fake accidents or made-up crashes to either claim damages for accidental vehicles or to cover injuries while the incidents may not have happened at all in reality. A made-up crash is a frequent insurance scam that is brought to the notice of insurance companies and they should be wary about the claim forms received in respect of the same.
3. Manipulated Records in the Display
Making up records is what this particular insurance scam is all about. False data or fudged info is encrypted into claim forms to dupe insurance companies and these forms might cite benefits from multiple streams to cover the highest assurance sum under the same policy. This way, several insurance benefits or riders are simulated in the form of scenarios landing up on the claim forms. Data manipulation using tactical address proofs and circumstantial evidence proofs also relate to commonly occurring scams in the insurance industry.
4. Misappropriation of Premium Subscriptions
An insurance member might provide false or misleading information just to get unauthorized discounts from service providers. Premium deviation tactics are also used by insurers to secure unfair benefits from their policy documents. The members here might provide inaccurate details concerning their:
- Age
- Job
- Health
- Medical Records
These factors adversely impact premium calculations on the whole. Therefore, misappropriation happening at the form-filling stages also resorts to insurance fraud or scams on the whole.
5. Filing Multiple Claims Under the Same Policy
Insured members file multiple file names under the same banner or policy document just to increase the service coverage amount for that particular claim request. Members resort to duplication of bills and use multiple nominee names or details to cover the damages for the same policy. This type of insurance fraud is more prevalent under property insurance. The asset or history data records may even estimate inflated values of policy amounts.
6. Using Identity Fraud
Identity fraud is an insurance crime wherein suspicious third-party agencies or unauthorized officials steal your details and use them without your permission. The stolen info is predominantly used to create multiple records under different names. This way, fake insurance companies use the records to submit claim requests to enhance or inflate profits for their firms.
If you receive suspicious phone calls, contact your insurer bureau. The firms can also be contacted via their hotline so that you do not confuse a fair agent with a criminal.
Tips to Prevent Insurance Fraud
These are tips that help service providers be wary of insurance fraud and take preventive steps to avoid these scams:
1. Thorough Examination of the Insurer
The insurance company must thoroughly be examined so that insurance subscribers do not fall prey to fake companies or land up in cybercrime frauds that are happening within the insurance industry. You must also take time to investigate the credit standing of the insurance firm or research the market reputation the insurer enjoys on the whole.
2. Verification of the Provider’s Credentials/ Licenses
The insurance company’s credentials or licenses must thoroughly be verified before you choose a policy under the said firm’s name or brand. You can look at the official website of the insurance firm to validate if the registrations or liaisons the brand associates itself is for real or not. It is also important that you evaluate the insurer’s service quality and claim procedures that are involved here. You can further check for positive client feedback or testimonials by asking for samples of work undertaken for previous clients.
3. Avoidance of Cash Payments as Premium Subscriptions
Making cash payments is highly risky as liquid money could lead to theft or misappropriation of how much subscription payments have been received by the insurers from members. Instead, you can opt for online payments, credit card transfers, or net banking transfers so that you have double authentication entries of the payee as well as the recipient. This way, you ensure a clear trail of operations from the firm’s side while also providing a sense of relief to members who levy payments to your firm.
4. Protect Your Sensitive Info
As an insurance agent or as a reputed service brand, you must make sure you encrypt data walls or firewalls to safeguard the case-sensitive info of insurance members. Data protection policies must be followed to the tee to prevent cyber frauds like hacking or phishing. And, as a service provider, it becomes your vital responsibility to protect your customer’s data credentials like credit card pin codes, and so on.
5. Reading Policy Documents in – Depth
As an insurance subscriber, you must go through the terms and conditions of policy documents in depth. You must have a thorough know-how on:
- claim processes
- renewal procedures
- coverage limits
- rider benefits and their exclusions
This way, you would not fall prey to fake life insurance policies or incorrect coverage inclusions. You must also seek clarity with your insurance provider before you sign in on the dotted lines.
Suggested Reads: What is insurance fraud?
The Bottom Line
Knowing insurance scams helps you safeguard yourself from cyber threats and you will not lose your hard-earned money into the wrong hands. You must also look if the insurance policies that you choose align with your requirements or expectations so that you get what you are looking for.
