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Insurance Fraud Costs Americans $309 Billion a Year — Here’s How to Protect Yourself

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By taking these steps, you can help put an end to insurance fraud.

Key points

  • Insurance fraud costs Americans close to $1,000 every year in increased premiums and out-of-pocket costs.
  • A few common types include workers’ compensation fraud and healthcare fraud.
  • If you suspect that you or someone you know has been the victim of insurance fraud, contact the proper organizations such as your state’s department of insurance and the FBI.

A recent study conducted by the Coalition Against Insurance Fraud found that insurance fraud costs Americans $309 billion every year. With such a huge financial burden being placed on American families, it’s no wonder that many people are looking for ways to protect themselves from becoming victims of insurance fraud.

What is insurance fraud?

Insurance fraud is any type of deception used to obtain an insurance payout. It can be committed by policyholders, insurers, or third-party providers. There are many different types of insurance fraud, according to the report some of the most common include:

  • Workers’ compensation fraud: This is when someone files a claim for benefits they are not entitled to receive. For example, they may exaggerate the extent of their injuries.
  • Premium fraud: This is when someone misrepresents information in order to pay a smaller premium. For example, an applicant may misrepresent the safety features of their car, its location, the drivers, and vehicle use to get a lower auto insurance premium.
  • Healthcare fraud: This is where a provider bills for services not rendered or submits a claim for a more complex service with a higher reimbursement rate.

How does insurance fraud affect you?

Insurance fraud affects everyone in the United States. Because insurance companies have to pay out fraudulent claims, they ultimately raise the cost of premiums and out-of-pocket expenses for all policyholders. The 2022 study found that insurance fraud cost Americans $309 billion a year. This is the equivalent of $900 per person, or $3,800 for a family of four.

How to protect yourself from insurance fraud

There are a few things you can do to protect yourself from becoming a victim of insurance fraud. First, be aware of the most common types of fraud. This will help you identify the signs of insurance fraud. For example, if you’re in an accident and the other driver seems eager to settle out of court or pushes you to use a certain repair shop, they may be trying to commit fraud. If you receive an unsolicited call from someone claiming to be from your insurance company, beware! It could be a scammer trying to get your personal information.

If you suspect that someone is trying to commit insurance fraud, you can report it to your state’s Department of Insurance. All suspected fraud that is reported to the consumer hotline is typically forwarded to the fraud division for investigation. Other organizations you can contact are the FBI, the National Insurance Crime Bureau (NICB), the Coalition Against Insurance Fraud (CAIF), and the National Association of Insurance Commissioners (NAIC).

If you think you may have personally been the victim of insurance fraud, file a police report and contact the relevant organizations. Don’t forget to also contact your insurance company, as they may also have a department to investigate the potential fraud. By taking these steps, you can help protect yourself and others from falling prey to this costly crime.

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No one wants to become the victim of insurance fraud, but unfortunately, it’s something that happens far too often. By being aware of the types of fraud that exist and taking steps to protect yourself, you can help ensure that you don’t become another statistic. Do your research and always be on the lookout for red flags that could indicate someone is trying to commit fraud. If you think you may have been the victim of fraud, take action immediately by reporting it to the proper authorities.

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