How Does Insurance Fraud Cause Rates to Increase?

The insurance industry is in the business of risk mitigation, and when disaster strikes, some may see it as an opportunity to exaggerate or falsely file a claim with their insurer.
 
In some rare cases, individuals may even intentionally damage their property to receive a higher payout which is often referred to as opportunistic fraud.
 
Aside from being illegal, fraudulent insurance claims can indirectly lead to policy and premium rate increases, costing insurance providers billions over the course of a year. Keep in mind that insurance providers are still a for-profit industry, which, unfortunately, means that they wind up passing the cost of fraud onto their policyholders.
 
In fact, the FBI says an average American family will pay about $400 - $700 extra on their premium due to insurance fraud. Here are a few common ways that insurance fraud can happen:

• Padding or inflating an insurance claim (by professionals or individuals)
• Misrepresenting facts on your insurance application
• Submitting damage claims that never happened
• Staging an accident

“The FBI estimates that the total cost of insurance fraud (excluding health insurance) is more than $40 billion per year and insurance fraud costs the average U.S. family between $400 and $700 per year. In the late 1980s, the Insurance Information Institute interviewed[1] claims adjusters and concluded that fraud accounted for about 10 percent of the property/casualty (PC) insurance industry’s incurred losses and loss adjustment expenses each year. Using that measure, in 2019 and 2020 PC fraud would amount to $38 billion each year. The figure can fluctuate based on line of business, economic conditions and other factors.” - iii.org
 
Avoid Fraud with a Public Insurance Adjuster
 
If you have to file an insurance claim, it is important and beneficial to provide an accurate breakdown of your property damage to help minimize fraud and receive the proper payment under your insurance policy.
 
Always remember that a professional, experienced and knowledgeable Public Insurance Adjuster will inspect your damage, review your insurance policy and discuss what is and is not covered under your policy.
 
Our team at Reliant Insurance Adjusters is dedicated to providing you with the professionalism, experience, knowledge and resources to help get you the best possible outcome for your insurance claim. Contact us today to get started.