Along with the invention of insurance was also the invention of insurance fraud. The fraud which is connected to insurance fraud comes in different types, which includes life insurance fraud and auto fraud. This article will provide a general overview, while discussing the impact of fraud on society.
The gain of money is probably the common reason why a person would commit fraud. There are definitely a lot of policies which can be filed against those people who commit fraud, thus, it is very easy for these people who commit frauds to be exploited. The insurance policy is usually exploited by those people who are saying that they are claiming more loss than what they have gained, and also, they can inflate the value of the lost item.
Insurance fraud is generally divided into two classifications – soft fraud or hard fraud. Among the two classifications of fraud, the common one is the soft fraud or can also be called as opportunistic fraud. This type of fraud occurs when an insured party inflates an already legitimate claim. Soft fraud may happen if an individual does not tell the truth, for example, an individual was involved in a car accident, then he will claim that his vehicle had more damage than it actually has. Soft fraud can happen at the start of a new insurance policy, when an individual purchasing a policy misrepresents their actually situation in order to get a lower premium. An example of this is if someone is buying a car insurance policy but lies about the number of miles on the vehicle to obtain a lower premium.
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A hard fraud can also happen if an individual planned to have a loss just to receive an insurance payout. People with stolen vehicles are usually the ones who are involved in this kind of fraud. Hard insurance fraud are usually involved in different forms of crimes.
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It is true that the most common fraud is the auto insurance fraud. During 1996, it was known that approximately 36 percent of auto insurance claims were victims of fraudulent actions. Soft fraud in auto insurance fraud includes what was mentioned above, but also situations where a person claims an injury that did not actually occur during the accident in question, or if someone registers their automobile in a location that the insurance is less expensive. For instance, if a person lives in a major city, it is more expensive to insure the car, so they will register it with a suburban address in order to obtain a lower premium.