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Insurance fraud - whether committed by sophisticated criminals otherwise honest consumers or by insurance company employees and owners - is an increasingly expensive burden on the US economy taking money out of the pockets of all citizens This illegal activity diverts vital resources away from businesses law enforcement the civil justice system regulatory agencies and local emergency services There are no easy solutions to the problems of insurance fraud Consumers legislators regulators and insurers must work together over the long term to create an environment that either prevents insurance fraud or detects it easily when it occurs The first step in this process is creating a baseline understanding of the problem and potential solutions That is the purpose of this document What is insurance fraud Insurance fraud is any deliberate deception perpetrated against or by an insurance company or agent for the purpose of unwarranted financial gain It occurs during the process of buying using selling and underwriting insurance Insurance fraud is often classified as being either hard or soft Hard fraud is usually a deliberate attempt either to stage or invent an accident injury theft arson or other type of loss that would be covered under an insurance policy Sophisticated conspiracies involving medical doctors lawyers and their patientsclients are widespread and one of the most costly forms of insurance fraud in the United States A single crime ring can cost the insurance system millions of dollars a year Executives and employees within the insurance industry also commit hard fraud An employee may defraud an insurance company by accepting bribes or kickbacks from body shops or doctors to verify false claims Another example is an insurance agent who fails to remit policyholder premiums to the insurance company The agent pockets the premiums and hopes the policyholder does not file a claim This internal fraud also includes con artists who set up phony insurance companies and collect premiums from unsuspecting consumers but never or infrequently
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