One of the biggest problems of the insurance market today is undoubtedly the high rates of life insurance fraud. Not only because such frauds hurt the business itself, but also due to indirectly affecting consumers of insurance plans, particularly honest consumers. A life insurance policy fraud is characterized when a person deceives his insurance agent or company to collect money. The most common type of life insurance fraud is the so called soft fraud. A soft fraud is characterized when a person tells “little white lies” to the insurance company, especially when filling the questionnaire before signing the contract. Considered harmless by most people, soft frauds raise considerably the costs of insurance for everyone.
The hard fraud is however even more severe for the insurance market. It’s when a person deliberately fakes a situation to be reimbursed for an insurance claim. Someone may fake a car accident, an injury, a theft or even someone else’s death. This type of life insurance policy fraud is becoming more and more common, with people organizing crime rings to make even bigger schemes. The American Coalition Against Insurance Fraud estimates that insurance frauds in general, particularly life insurance fraud cost at least $80 billion a year in the USA alone.
Consequences of life insurance policy fraud are various. The most remarkable being the high premium costs in the whole market. Besides insurance investment schemes are serious threats to most people, and seniors are particularly vulnerable by such schemes. In more extreme cases of life insurance policy fraud, even people end up physically injured or actually killed in staged accidents or schemes to get life insurance money.
To avoid deliberately entering in a life insurance fraud scheme, always be suspicious if prices seem to low to be true, and never sign blank claim forms. Also make sure that the so common “free services” are not actually hidden on your bill.