Insurance Fraud: How to Protect Your Agency

CEO Newsletter

Insurance Fraud. Unfortunately, it’s a growing issue in our industry. Consumers and agents are increasingly adept and creative when it comes to finding ways to commit fraud. Fraud can happen in multiple stages of the insurance transaction – committed by the agent to steal premiums via forgery or later during the claims process by the customer. There are an immense number of ways to commit illegal acts when it comes to insurance.

One rapidly growing source of fraud is from natural disasters. The recent active hurricane season we’ve had, provides ample opportunity for disaster fraud via padding – in which customers will inflate the severity of claims in order to collect additional money.

The total cost of insurance fraud (non-health insurance) is estimated to be more than $40 billion per year. That means Insurance Fraud costs the average U.S. family between $400 and $700 per year in the form of increased premiums.

In fact, some sources estimate that nearly 10 percent of all claims are fraudulent.*

And it’s not just consumers who can benefit from false or inflated claims. A type of fraud that’s commonly overlooked during natural disasters, is contractor fraud. This happens when contractors go door-to-door in damaged neighborhoods offering their services for repairs. Then they pocket the claim money without ever completing the job. You should advise your customers wo always work directly with the insurance company to find a referral to a reliable repair or contractor service, in order to avoid being a victim of this type of fraud.

Our job as agents is two-fold – as we owe a duty to both customer and carrier. It’s vital we always act with the highest ethics and morals during these financial transactions by making sure we provide accurate and truthful information to the carrier during the process of writing the policy, and in any assistance we provide during the claims process. In addition, we should also work to educate our customers on how to submit accurate claims with solid documentation, as well as how to avoid being taken advantage of.

I hope this issue of Smart Choice® Magazine provides you with some interesting and useful information on insurance fraud, as you navigate these tricky waters. 

Doug

*https://www.fbi.gov/stats-services/publications/insurance-fraud
*https://www.insurancejournal.com/magazines/mag-features/2017/08/21/461575.htm