Insurers-in particular an insurance firm, as an institutional practice-are perpetrated to a lesser extent by fraud. The rejection of valid claims is the most prevalent form of fraud. This is considered rare because corporations make tremendous profits from their legal activities, and in contrast, the amount “lost” in any individual argument is small.
There is an epidemic of insurance fraud by individual workers, in addition to fraud by the company itself. This differs from assessors, adjusters, and inspectors who (knowingly) assist a policyholder in defrauding their company on behalf of the company to individuals who commit fraud in order to enhance their own results, thereby standing in the company.
Forms of insurer fraud:
Companies may instruct their adjusters to be very conservative in evaluating claims, especially in periods of widespread loss. In some cases, without drafting an actual contract, such a firm has been found to collect the premiums-thus, when a claim is to be filed, the consumer finds out they are not covered at all, at which point the fraudster may either try to cover their tracks or simply fold up their shingle.
This is most popular for insurance forms that, in the event of unlikely incidents, provide substantial payments. Another type of fraud is underpayment by colluding to falsify the extent of damages or the cost of fixing them with inspectors and appraisers.
More frequently, this is an argument on the part of a disgruntled claimant, and an insurance provider will be inclined to look for inspectors and assessors who, in their opinion, are very cautious. Generally, a matter of purpose and contact between the parties is the difference between being conservative and committing fraud.
Selling bizarre coverage or setting terms that are so rigid that it is impossible that a policyholder would be able to satisfy their obligations to seek settlement for a valid claim is a practice that borders on fraud but is also considered legitimate.
The judicial system has been inconsistent in its handling of such cases, depending on the political climate and the facts of a particular case: they may be punished as acts of fraud or dismissed as a result of consumer idiocy according to the norm of the reasonable man. Marketing frauds often occur, such as churning, sliding, and twisting.
As with most crimes, fraud losses can not be reliably calculated because only what is observed is measurable, and the usual suggestion is that the “real” value can be greatly greater than the measurable value.
With that in mind, 10% of insurance payments are reported to be due to fraud, which is again a totally random figure, and the burden of damages is largely borne by customers who pay insurance premiums.