Types of Insurance Frauds to Watch Out For

Only a few Canadians commit insurance fraud, but its consequences affect everyone. Each year fraud costs insurers billions of dollars, which raises premium averages. Unfortunately, many of these fraudulent activities involve innocent parties, making it hard to detect. Awareness of insurance fraud and its many forms is the first step in preventing it.

By definition, fraud cheats the insurance system through inaccuracies in a claims report. These inaccuracies can range in severity—but they are always intentionally deceptive and malicious. Some examples of fraud include:

  • Lying about the conditions of a claim to mask negligence or participation;
  • Including previous or unrelated damage on a claims form;
  • Withholding information that would otherwise affect the policy and its payout;
  • Staging an incident to receive insurance compensation.
Insurance Fraud Affects Everyone

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The final form of fraud, staged incidents, applies largely to auto insurance. In recent years, staged collisions have grown in popularity. Below describes some of the common scenarios involving fraud.

  • The driver rams an innocent vehicle, making it look like an accident.
  • The driver hits his or her breaks to cause another driver to rear-end the vehicle.
  • The driver waves in a merging vehicle then enters into a collision.

 

The Legal Repercussions of Insurance Fraud

If your insurer suspects or convicts you of insurance fraud, various things can happen. Firstly, the insurer will deny your claim. If the company decides not to cancel your policy, you may end up paying higher premiums in the future. Otherwise, you will lose your premium and become uninsurable by many other brokerages. Criminally, insurance fraud can also incur up to 14 years’ imprisonment for cases above $5,000.

To learn more about insurance fraud and how it affects you, watch the video below.