Insurance fraud
Insurance Fraud
Insurance fraud (/ɪnˈʃʊərəns frɔːd/) is a deliberate deception perpetrated against or by an insurance company, agent, or consumer for unjustified financial gain. It is considered a serious crime in many jurisdictions.
Etymology
The term "fraud" originates from the Latin word "fraus", which means deceit or trickery. The term "insurance" comes from the French word "ensurer", meaning to make certain.
Types of Insurance Fraud
Insurance fraud can be classified into two broad categories: Hard Fraud and Soft Fraud.
Hard Fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto theft, or fire that is covered by their insurance policy in order to receive payment for damages.
Soft Fraud is more common and is often seen when policyholders exaggerate their claims or report damages that never occurred in order to obtain a larger settlement.
Detection and Prevention
Insurance companies have established Fraud Investigation Units (FIUs) to deal with the increasing problem of insurance fraud. These units use advanced analytics, data mining, and machine learning to detect patterns and anomalies that might indicate fraudulent activity.
Related Terms
- Claim - A formal request to an insurance company asking for a payment based on the terms of the insurance policy.
- Policyholder - The person or entity who owns an insurance policy.
- Premium - The amount of money an individual or business pays for an insurance policy.
- Underwriting - The process of evaluating the risk and exposures of potential clients.
Legal Consequences
The legal consequences of insurance fraud can be severe and may include fines, probation, restitution, and imprisonment. The specific penalties depend on the nature and severity of the fraud, the amount of money involved, and the laws of the jurisdiction where the fraud occurred.
See Also
This WikiMD.org article is a stub. You can help make it a full article.