Vigilance Pays Off in Preventing Insurance Fraud
As a business owner, you may not think that insurance fraud affects your business.
While you may not experience fraud directly, you certainly experience it indirectly through increased insurance premiums. As the Federal Bureau of Investigations says on its website: “The total cost of insurance fraud (non-health insurance) is estimated to be more than $40 billion per year. That means insurance fraud costs the average U.S. family between $400 and $700 per year in the form of increased premiums.”
Who is committing $40 billion in fraud? It’s true: organized crime rings do commit fraud. However, it’s the high number of ordinary people who commit fraud that may be the most telling. Particularly during tough economic times, many individuals look for ways to raise money by defrauding their insurance companies.
Some of the most common scenarios target auto insurance and worker’s compensation insurance. In these scams, people generally claim larger benefits than they are due. In car accidents, for example, requests for repairs or reimbursements are padded to cover deductibles. Similarly, in workers compensation claims, injuries are exaggerated, so the insured workers are off the job for a longer period of time and collect more than is warranted for the type of on-the-job accident they suffered.
Your best defense is a great offense. Know your executive team and your staff personally. Train them well, and put into place a good system of controls and cross-checks. You’ll feel a lot more confident that you have reduced your risk of experiencing a fraudulent claim.