Insurance Fraud

Insurance Fraud

The estimated cost of insurance fraud not related to health care coverage exceeds $40 billion a year, according to the Federal Bureau of Investigation (FBI). The types of scams vary, ranging from exaggerated claims (often referred to as soft fraud) to blatant falsehoods involving accidents or losses that never actually occurred (hard fraud).

Insurance fraud is a crime with many victims. Not only does it negatively affect insurance companies, but it also has repercussions for policy holders and the public in general.

When fraud causes losses for insurance companies, it can result in increased premiums for everyone. This trickle-down effect poses a problem for policy holders, some of whom may even cancel their coverage due to the higher rates.

Scams can also be particularly harmful to victims of identity theft who discover that fraudulent claims have been made under their coverage.

Insurance fraud and identity theft

Insurance fraud is one of the many crimes a criminal may commit when he or she acquires a victim’s personal information. An insurance scam will often occur when an identity thief has already committed another type of fraud.

For instance, if a criminal has already used another person’s identity to obtain employment, he/she may then use that victim’s identity to acquire health insurance through the employer. Or, an identity thief may use a victim’s identity to purchase big-ticket items, like a car or a house, and then use that person’s identity to buy auto or property insurance.

Medical identity theft is another example of insurance fraud. If an identity thief steals a victim’s health insurance information, he or she can then use it to buy prescription drugs or to receive free medical treatment. Medical fraud can have devastating consequences, from ruining a victim’s credit to creating inaccurate health records, which can potentially jeopardize a victim’s life.

Protecting yourself
Here are a few ways you can avoid becoming a victim:

  • Monitor your credit. Keep an eye on your credit by checking your credit reports from each of the three national bureaus, Equifax, Experian and TransUnion, on a yearly basis. If you notice any unauthorized medical bills, immediately place a credit freeze and fraud alert on your credit.
  • Double check your medical records. You should also keep an eye on your medical records to make sure they are accurate. If you notice anything unusual, you should report it right away and start working to get it corrected.
  • Monitor your policy. Make sure you monitor what is being paid for under your insurance coverage. Request a record from your provider at least once a year.
  • Limit what you share online. Be vigilant when it comes to online file sharing. Getting access to only a small portion of your personal information, such as your health insurance information, can give identity thieves everything they need to steal your identity and wreak havoc on your finances.