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Fraud occurs whenever an individual misrepresents information in order to get money that they are not entitled to. Insurance companies take fraud seriously. Fraudulent claims can lead to lost profits, which will in turn cause the cost of insurance policies to increase for all customers. In order to reduce the incidence of fraud, insurance companies employ an investigative team that reviews claims for suspicious activity.
Certain situations may flag your account for fraud. If you do undergo a fraud investigation, don’t panic; they happen frequently and usually resolve very quickly. As long as you have not engaged in any illegal or fraudulent activities, the investigation should come out in your favor and the policy will resume as normal.
Types of Insurance Fraud
Although there are numerous methods of committing insurance fraud, all of them fall into a few general categories:
— Misrepresenting the facts of a loss
This could be telling the insurance company that damage occurred in one way when it actually happened in another, especially if the difference . For example, if a person hits something but reports that another car hit theirs and fled the scene, it would be considered insurance fraud.
— Misrepresenting the date an accident occurred
In order to cover an accident, you must have active insurance at the time of the accident. If you file a claim for preexisting damage and state that it occurred at a later, covered date, you are guilty of insurance fraud.
— Purposely damaging your own vehicle
This is probably what most people think of when they consider insurance fraud. Examples could include vandalizing your own car or claiming that it was stolen when it really wasn’t.
— Misrepresenting yourself for lower rates
For example, if you lie about where the vehicle is kept, who drives it or how many miles you drive in a year in order to reduce the cost of your premiums, you may be guilty of insurance fraud.
As a rule, all fraud is committed with the purpose of profiting from the insurance company in some dishonest way, whether through the reduction of premiums or misrepresentation of a claim. It sometimes occurs that a person inadvertently presents their claim incorrectly, such as by giving the wrong date of loss when filing the claim. This is an honest mistake and if the insurance company determines that you did not mean it maliciously, they will usually close the investigation without punishment.
If, however, you are determined to committing fraud, your insurance claim will be denied. The policy may be canceled and you may even face criminal charges depending on the situation. Insurance companies are very thorough about their investigations and the risks of being caught committing fraud far outweigh any short-term benefits.
What Happens When a Company Suspects Fraud
All insurance companies have a special investigations unit (SIU) that reviews claims and policies for fraudulent activity. When a claim is entered into the insurance company’s computer, certain “red flags” are noted and if there are enough, the claim will be referred to SIU.
For example, if a person reports an accident within a day or two of the policy being purchased, that may be a sign of potential fraud as the customer may be trying to claim preexisting damage. People with a prior history of theft may be referred to SIU if they report another theft. Many types of vandalism are referred to SIU especially if the incident was not reported to the police.
Once the SIU department receives the referral, they will review the claim. In many cases, the investigation ends at a claim or policy level; the SIU adjuster will review the information and decide that a fraud is not likely. In other cases, they may need to contact the insured to ask some questions, or they might interview other people related to the situation.
It’s important to realize that while a claim is being investigated by SIU, no payments can be made and the details of the information cannot be released to anyone until the investigation is complete. If you contact the claims department about your claim, they will not be able to tell you anything about its status until SIU has finished investigating; in some situations, they may not be able to view your claim at all until the investigation is complete. They may also not be allowed to explain to you that you’re being investigated for fraud.
All of the secrecy surrounding these investigations can be alarming to the customer, but it’s necessary to the investigation. If you find yourself undergoing fraud investigations as part of a claim or policy change, don’t panic. It may take a few extra days for the claim to resolve, but if you have been up-front and honest with your insurance company the SIU investigation should conclude peacefully and the claim will continue without further interruption.