Insurance fraud occurs when individuals deceive an insurance company, agent or other person to try to obtain money to which they aren’t entitled.  It happens when someone puts false information on an insurance application and when false or misleading information is given or important information is omitted in an insurance transaction or claim .

Insurance fraud is committed by individuals from all walks of life.  The Insurance Fraud Division (IFD) has prosecuted doctors, lawyers, chiropractors, car salesmen, insurance agents and other persons in positions of trust.  Also, anyone who seeks to benefit from insurance through making inflated or false claims of loss or injury. . 

Insurance fraud can be "hard" or "soft."

Hard Fraud: Someone deliberately fakes an accident, injury, theft, arson or other loss to collect money illegally from insurance companies. Crooks often act alone, but increasingly, organized crime rings stage large schemes that steal millions of dollars.  Hard fraud also includes illegal acts by persons who are regulated by the Utah Department of Insurance.

Soft Fraud:  Normally honest people often tell "little white lies" to their insurance company.  Many people think it’s just harmless fudging.  But soft fraud is a crime, and raises everyone’s insurance costs.  

What is the cost?

Usually the cost of the fraud is passed on to the consumer in the form of higher premiums.  Prices of goods at your department or grocery store keep rising when businesses pass higher costs of their health and commercial insurance onto customers.  Businesses lose millions in income annually because fraud increases their costs for employee health coverage and business insurance.

Insurance fraud costs Americans at least $96 billion a year, or nearly $950 for each family, according to estimates by the Coalition Against Insurance Fraud.  Insurance fraud is hard to measure because so much goes undetected.  There is enough evidence to exhibit that fraud is widespread — and expensive.

The cost of fraud in America varies widely.  Here are several of the better-known annual estimates:

• $96.2 billion (Conning & Company). All lines of insurance.

• $18-$20 billion (National Insurance Crime Bureau).  Only property and casualty fraud.

• $100 billion (U.S. Government Accounting Office).  Only fraud and abuse in Medicare and Medicaid.

Recent cases:

Utah has been called one of the "mortgage fraud hot spots" in the country.   The Utah Division of Insurance Fraud has investigated and prosecuted cases identifying over $80 million in losses to victims.

Bad Attitude

The problem of insurance fraud arises from a tolerant attitude toward fraud.  Too many consumers believe insurance fraud is justified.   More than one third of people hurt in auto accidents exaggerate their injuries.  This adds $13-$18 billion to America’s annual insurance bill, according to a study by the Rand Institute for Civil Justice.

Nearly one third of doctors exaggerate the severity of a patient’s illness to help the patient avoid early discharge from a hospital, according to the Journal of the American Medical Association.

Studies reveal that a surprisingly high percentage of phony claims are filed each year:

• 28% of auto claims (Rand Corporation).

• 25% of workers compensation claims (U.S. Chamber of Commerce).

• 10% of healthcare expenditures (U.S. Government Accounting Office).

This environment of tolerance makes it much easier for con artists to operate safely.  Research by the Coalition Against Insurance Fraud reveals:

• Two of three Americans tolerate insurance fraud to varying degrees;
• Two of five Americans want little or no punishment for insurance cheats; they blame the insurance industry for its fraud problems because they believe insurers are unfair.
• One of three Americans wouldn’t report insurance fraud by someone they know, according to a study conducted by Progressive Insurance.

In a recent national insurance fraud forum conducted by the National Insurance Fraud Bureau (NICB), the International Association of Special Investigation Units (IASIU) and the Coalition Against Insurance Fraud (CAIF), it was determined that insurance fraud flourishes because:

• Unacceptably large amounts of normally honest consumers still tolerate fraud, readily commit “soft” fraud themselves, and have relatively low sympathy for insurance companies being victimized by fraud;

• The public views insurance fraud as a crime of easy money with little risk of getting caught, or of few serious consequences if they are caught;

• People believe they are entitled to commit fraud after paying high premiums with few or no losses for many years;

•  Too many insurers are in denial about the scope of fraud and its impact on their bottom lines;

•   People lack a strong sense of outrage over insurance fraud as a crime, and view fraud as a victimless crime at worst.

Protect Yourself: Stay Alert

You can protect yourself against insurance scams: Stay alert, ask questions, and go slow or back out if an insurance transaction seems suspicious.

• Never sign blank insurance claim forms.
• Demand detailed bills for repair and medical services. Check closely for accuracy.
• Make sure "free services" aren’t actually hidden in your insurance bill.
• Be wary of buying insurance from door-to-door or telephone sales people.
• Be suspicious if the price of insurance seems too low to be true.
• Contact the state insurance department at 801-538-3800 to make sure the agent and company are licensed.  Always request copies of policies and applications to verify your coverage.  Follow-up by contacting the carrier to verify your application and premium monies were received.
• Keep your insurance identification number secret; insurance crooks can steal it and involve you in scams.
• Be wary if a car suddenly pulls in front of you, forcing you to follow dangerously close. You may be set up for a staged accident.
• After an auto accident, be careful of strangers who offer you quick cash, free dinners or other inducements to see a specific medical clinic, doctor or attorney. They could be part of a fraud ring.