Insurance is a very useful tool should something of value go missing. Yet, one source reports that sometimes people take advantage of the system in order to gain profit. Another source writes that when the economy is especially bad, ordinary people start lying to their insurance companies in order to receive a monetary compensation.
The most popular cases of insurance fraud since this recession are theft and mysterious objects disappearing. One man burned down his own house and set fire to his car claiming that it happened when he was cooking in the kitchen; he went on to say that he accidentally threw one pan out the window into the back seat of his car while he accidentally threw his other pan onto his living room couch. Needless to say, the authorities did not believe him and instead of receiving compensation for his loss, he received five years of probation.
In most states, arson is considered to be a felony which is the most punitive class of crime. Insurance fraud is never a good idea and should you get caught, it is best to contact an attorney as soon as possible. A few popular insurance fraud schemes include: home and car insurance, health insurance, workers compensation, Medicare and Medicaid fraud, as well as slip and fall injuries.
The Coalition Against Fraud Insurance (CAFI) was found in 1993 when insurance fraud was at a rampant high. The insurance fraud was causing the rest of the citizen to have higher premiums. In order to help, CAIF began new anti-fraud laws and started to educate the public about fraudulent activities.
They cite that workers' compensation employers in Massachusetts have lost $100 million in profits due to insurance fraud. They also allege that businesses who have been convicted of unlawful workers' compensation tactics usually distort the numbers of employees who have risky occupations to a status of low risk; this is done in order to avoid paying the high premium workers' compensation fee that is mandatory through state laws. Another way of avoiding these fees is to pay employees unofficially under the table. In New York, 10.3 percent of the workforce is misclassified; this means that 39,500 employers misclassified 70,785 employees.
The CAIF also states that staged-car accidents trouble vehicle insurers each year with false claims. In 2007, $4.8 to 6.8 billion in fake accidents were filed. A staged accident is usually engineered by a group of con artists and there are several types of schemes: T-bone, the wave, swoop and stoop, left-turn drive down, and right-turn drive down. The bulk of these accidents happen while waiting for a car to turn. Generally, one con artist blocks the car so it can only drive into another car that the other con artist is driving. These schemes only require two to three people. Another way that auto insurance fraud is intentionally executed is through renewal application discrepancies; reportedly there was $15.9 billion revenue lost in 2009.
Lastly, the CIAF reports that there are also fraudulent insurance claims when a thief will purposely slip or trip themselves to receive compensation through insurance companies. This is called a slip and fall injury, and three percent of these events are planned. Also, fake injury claims as well as financial related costs total to a $2 million industry.
While insurance fraud convention is usually considered a penalty, each state awards different penalties pending the circumstances. In Alabama the average jail time is a sentence of one to seven years with a three year probation sentence. The fine can range from $10,000 to $100,000; the judge may also order the repayment of the fraudulent funds as well. One of the harsher state penalties is from the state of California which fines $50,000 to $2,500,000. Jail time in the golden state ranges from eight to 16 years with a probation period of one to five years. Visit your state website to view your state's penalties today.
