Insurance fraud makes coverage a complex matter
Insurance can be a very tricky subject to navigate. Every sector of the insurance industry is awash with regulations, standards, and complex business practices that can make understanding coverage a chore at best. The complexities of insurance can cause a great deal of confusion, even among those that should not be confused. In the U.S., state and federal lawmakers often pass legislation in an attempt to mitigate the dangers that exist within the insurance sector. Much of this legislation institutes regulations that govern how insurance companies operate and defines what they can and cannot be held liable for. Unfortunately, many of the regulations designed to help protect consumers has the opposite effect as they spur insurance fraud.
Insurance fraud is a problem that is as complex as the insurance industry itself. Not all fraud is born from regulatory oversight, as many criminals are simple proficient enough to circumvent existing regulations in order to exploit the system. The majority of insurance fraud, however, is based on exploiting loopholes that exist in regulations governing the insurance industry. This fraudulent activity has a massive monetary impact, but it can also affect the lives of people that are not directly targeted by fraud itself.
Fraud deals a grievous financial blow
According to the Coalition Against Insurance Fraud, over $80 billion in fraudulent claims are filed every year in the U.S. alone. Many of these claims come from the auto insurance and workers compensation sectors. False injury claims from staged car accidents have become quite common in some parts of the U.S., especially in states that have no-fault laws. These laws require insurance companies to issue benefits to policyholders in the event of a car accident no matter where fault actually lies. Such laws are easily exploited for monetary gain and fraud rings can be established around the shortcomings that are associated with no-fault laws. Doctors and insurance agents themselves can be associated with these criminal organizations just as anyone else can.
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Insurance fraud has a broad impact. The impact of fraud is immediately seen by insurance companies as financial loss, but these companies are not keen to let any loss go unanswered for any length of time. The losses incurred by insurance companies are typically transferred to policyholders in the form of higher insurance premiums. Higher premiums could become a financial burden for consumers, who find that they can no longer afford coverage and thus go uninsured.
Though insurance fraud is quite prevalent in the auto insurance sector, it is also relatively common in health insurance. The sale of fraudulent insurance policies has become quite common in the U.S. as the health care landscape changes. This change has generated confusion among consumers, many of whom are deceived into believing that certain policies offer universal coverage no matter where the policyholder may be in the country.
There are ways to mitigate the risks associated with insurance fraud, but mitigation methods largely depend on the type of fraud a person may be exposed to. In terms of auto insurance fraud, problematic legislation could make it difficult for consumers to protect themselves. As such, they must rely on the efforts of law enforcement and the insurance companies that combat fraud on a nearly daily basis. In terms of health insurance, understanding some of the basic regulations that exist regarding policies and what kind of coverage they can provide can protect someone from fraud.