Fraud affects each kind of insurance, regardless of whether it is Non-Life, Life or Health Insurance. These incorporate giving untruthful or deficient information in applications for insurance or answers on an insurance proposal frame; presenting a claim for a misfortune based on misleading or untruthful circumstances, including exaggerating a certified claim; and generally being misleading or untruthful in dealings with an insurer with the aim of gaining an advantage under the insurance contract.
Insurance fraud may be committed by the policyholder or by a third party claiming against an insurance policy. When someone provides false information to an insurance company in order to gain something of value that he or she would not have received if the truth had been told‚ they have committed insurance fraud. That is when someone knowingly lies to obtain a benefit or advantage to which they are not otherwise entitled, or someone knowingly denies a benefit that is due and to which someone is entitled.
Some insurance companies generally estimate some percentage of their claim expenditure or budget to cater for fraud. The insurance industry incurred losses and loss adjustment expenses each year, although the figure can fluctuate based on line of business, economic conditions and other factors.
Misrepresentation
Representation is a factual statement made by the insured at the season of, or preceding, the issuance of the policy to offer information to the insurer and generally prompt the insurer to go into the insurance contract. Getting into a contract with an individual or a company on false grounds by making statements that are not as per the facts is known as misrepresentation. In an insurance policy, misrepresentation with respect to the insured gives the insurance company the right to terminate the policy.
Misrepresentation may be unintentional, however in the event that it is material, or as such, sufficiently important to affect the insurer's choice to give a contract or incorporate certain terms, the insurer may void the contract. The information asked for by an insurer is use to assess the dimension of hazard that a potential customer speaks to.
The insurance policy clearly states that the whole policy is void if the insured conceals or distorts material facts or circumstances; engages in fraudulent conduct; or makes false statements relating to either the insurance or a loss to which the insurance applies. Insurance contract winds up void when it is based on intent to deceive.
Material misrepresentation
Material misrepresentation is a misstatement to an inquiry amid the application procedure that is important to the point that, had the reality of the situation been known, the insurance company would not have issued the policy or would have issued it with a surcharge. Notwithstanding, if the incorrect piece of information was 'material' which could be either a missing piece of information or a false claim of something in the application, at that point it is likely the insurance company will void the contract and return the premium, leaving the applicant uninsured from the time the policy was applied for.
A material misrepresentation exists if the insurance carrier can demonstrate that an alternate premium would have been charged for coverage had the actual facts been revealed in the application. Example, if an insurer asked an applicant for car insurance, on the off chance that the individual in question had been involved in any earlier accidents, and the applicant answered "no", notwithstanding the fact that the person in question had been engaged with five accidents in the course of the last two years. Understandably, the premium paid by an individual engaged with five earlier accidents would be higher than an individual with no earlier accidents, as they are to a greater extent a hazard to the insurance company. Subsequently, a material misrepresentation exists and the insurance company has the choice to cancel the coverage and deny any claims.
Fraudsters
Fraud may be committed by various parties associated with insurance transactions: applicants for insurance, policyholders, third-party claimants and professionals who provide services and equipment to claimants. Regular frauds incorporate inflating actual claims; distorting facts on an insurance application; submitting claims for wounds or damage that never happened, benefits never rendered or hardware never conveyed; and "staging" accidents. All the elements include in these acts are fraudsters.
Scenarios
A false insurance claim could be when individuals sell their cars and report the cars as stolen. With this scenario, the insured increased the value of the car, purchased comprehensive insurance, and later report that the car has been stolen with the goal of getting more cash from the insurance company. Some fraudsters also purchase accident vehicles from abroad, purchase comprehensive insurance cover, and later report that the vehicles had been involved in an accident with the aim that the insurance companies will repair those vehicles for them. For other fraudster, they report a small accident and inflate the estimate.
For Homeowners Insurance, fraud can happen when a policyholder stage fire in his or her home after taking some important family things which have been insured, conceal them before the fire takes place. They simply set their homes ablaze and ask for compensation. With this goal, the fraudsters can say they have lost more than they really have. Alternatively, an individual may deliberately pulverize the asset they are claiming insurance for.
In Life Insurance, health care suppliers can charge health insurance companies high expenses for normal standard procedures, or services that were not in any case rendered. Some perform examinations that are not required for a particular disease so they can get more cash from the insurers.
Criminals can take a Life Insurance policy for themselves and make their life partners the beneficiary. After the policy has been in actuality for several months, the insured criminal fakes his death, and the life partner who is the beneficiary gets the benefit. At the point when the funeral is finished, the mate all of a sudden disappears. This is normal in the western world and South America.
Insurance fraud could also be the point at which an individual gives false information to an insurance company so as to get insurance cover on progressively favorable terms, or deliberately under-insure to lessen the premium. On account of motor insurance, a driver who had accident before may say "no" when he is asked of past accident encounter any time he changes insurance company, or when he purchases another vehicle. This kind of fraud is normal in Ghana because almost all the insurance companies don't have accident tracking frameworks. Different insurers don't try to investigate because they desperately require the business.
Conclusion
It is the obligation of insurance applicants to give the insurer all the necessary information concerning the risk they want cover for, as will be useful to the latter in estimating its character and in deciding if to accept the risk. The information shapes the basis of the contract as made. It depicts, marks out and characterizes the risk assumed. Consequently the untruthfulness of any information will necessarily void the contract.
Customers must be totally legitimate with each aspect of an insurance application and claim. All things considered, being straightforward can also result in a denial of a whole claim, which now and again could be a multi-million dollar claim.
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