More Common Types of Insurance Fraud
Insurance fraud is a serious crime that steals billions of dollars from the industry each year. The FBI estimates over $40 billion in losses due to insurance fraud annually – resulting in $400 to $700 in extra costs per family via increased insurance premiums. Insurance fraud refers to the intentional defrauding of the insurance system by a consumer, employer, health care facility or insurance provider, typically for financial gain. Some types of insurance fraud are more common than others in the state of Arizona.
Workers’ Comp Fraud
The workers’ compensation system in Arizona provides financial recompense to injured employees on a no-fault basis. Covered employees do not have to prove anyone’s fault to receive compensation for their damages. Workers’ compensation fraud is a common scheme in which consumers, employers and health care companies may take advantage of the program. Any intentional misrepresentation of facts a party makes during a workers’ compensation claim could constitute fraud.
A common example of workers’ compensation fraud is an employer knowingly misrepresenting employees as independent contractors to get out of offering workers’ compensation coverage. Employers do not have to purchase workers’ comp insurance for independent contractors. Misclassifying employees, therefore, could save the employer considerable money. It is against the law to misclassify the employment relationship to get out of offering benefits such as workers’ comp and medical leave.
Another type of workers’ comp fraud is an employee deceiving an insurance company about an alleged work-related injury. Lying about an injury or illness to obtain workers’ compensation coverage is a form of fraud that could result in criminal consequences. If the insurance company discovers the applicant is guilty of intentionally misrepresenting facts, the claimant could face serious fines and jail time. Even exaggerating one’s symptoms of a real injury or illness could constitute fraud in Arizona.
Life Insurance Fraud
Life insurance is a popular type of insurance that can give an individual and his or her family peace of mind. Life insurance will offer financial benefits to surviving loved ones after the insured person dies. It could be the only thing keeping a loved one financially stable after an unexpected death. Defrauding the life insurance system could take many forms.
- Misrepresenting material facts on a life insurance application
- Death fraud, in which a claimant fakes a policyholder’s death
- Beneficiaries forging insurance documents to illegally obtain benefits
- Fraudsters conducting phone scams pretending to be insurance providers
- Real insurance agents deceiving consumers for kickbacks or perks
A consumer may be able to detect signs of potential life insurance fraud to prevent financial losses. If an insurance agent – or someone claiming to be an agent – is unnecessarily aggressive in getting the consumer to purchase a plan, the consumer should step back and evaluate the situation. It could be a criminal trying to make money defrauding the victim. Consumers should not give in to pressure from insurance agents or brokers. Instead, they should report it to the government as potential fraud.
Disability Insurance Fraud
Disability insurance offers important financial benefits to individuals with disabilities. If a disability prevents a person from obtaining gainful employment, he or she could be eligible for several types of disability insurance. Some options include Social Security Disability Insurance (SSDI) and Supplement Security Income (SSI). Disability insurance fraud increases the cost of this type of financial protection for people with disabilities.
The most common form of disability insurance fraud is a person making false statements about his or her medical status. Lying about having a disability – or the details of the disability – for financial gain is against the law. Knowingly concealing facts or making false statements to obtain disability benefits through Social Security or workers’ compensation could result in prison time and/or fines of up to $20,000. All types of insurance fraud are serious crimes that can hurt everyone involved.