Watch out for insurance fraud's red flags

Receiving a payout from an insurance company based on a lie is insurance fraud.

Exaggerating the loss of an insurance claim to get more money from an insurance company is insurance fraud.

Insurance fraud is a felony. Since ignorance of the law is not a defense, I thought it’d be a good idea to let you know some important things about insurance fraud. According to a 2022 study conducted for the Coalition Against Insurance Fraud, this crime costs Americans $308.6 billion annually. That’s about $3,800 a year for a family of four. Some estimates suggest that 20 cents of every premium dollar go to cover the cost of fraud.

Here are a few things to remember about insurance fraud:

Don’t ignore red flags. If you’re suspicious about anything dealing with insurance, stop and call the Department of Insurance at 855-4081212. We have consumer experts available to answer your questions weekdays from 8 a.m. to 5 p.m. You may also find us online at www.ncdoi.gov.

If you see or suspect fraud, report it. You may anonymously report fraud by calling our Criminal Investigations Division at 919807-6840 or toll free from anywhere in North Carolina at 888680-7684. You may also report it online at www.ncdoi.g gov, ‘fraudcontrol. We have 50 special agents investigating insurance fraud in North Carolina, along with a team of special prosecutors to assist local district attorneys with fraud cases.

Insurance fraud is a crime which leads to higher rates for all consumers. All businesses must take fraud into account when setting rates. For example, stores take shoplifting and other forms of theft into account when setting prices. The cost of fraud is passed along to consumers in the form of higher premiums.

Insurance fraud is a form of theft. It comes in various shapes and sizes. While some insurance fraud acts are intended to defraud consumers, others are committed by consumers.

Fake insurance companies or agents defraud consumers by taking money for premiums on bogus policies with no intention of paying claims. Here are some examples:

Scammers may offer fake policies at costs that are significantly lower than competitors’ prices.

Companies may sell non-insurance products marketed to look like insurance. For example, an agent working for a company may sell health discount plans, calling the plan ‘insurance” when it is an unregulated, noninsurance product.

A dishonest agent may collect a premium from a consumer without forwarding the payment to the company. The consumer believes premiums are paid, while the insurance company has no record of payment and cancels or does not renew the policy.

Consumers can also commit fraud. Here are some examples of consumer-initiated insurance fraud:

A motorist may deliberately stage an automobile crash, claim injury and make an insurance claim.

A consumer may exaggerate a legitimate claim, hoping to obtain a larger settlement than he or she is entitled to receive.

A consumer may falsify documents or provide false information on a claim.

A motorist may have allowed an insurance policy to lapse and have a crash. After the crash, the consumer will get the policy reinstated and claim the crash occurred after the policy was reinstated.

I hope these tips help you avoid becoming a victim of fraud. Together, we can work to fight insurance fraud and slow the increase in premiums.

Mike Causey is the N.C. Commissioner of Insurance. His office can be reached at commissioner@ncdoi.gov.

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