Insurance fraud: the most common techniques to mislead an insurer

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Apr 2019

From the hiding of information during the subscription to the false declaration of claims, the insurance fraud is usually seen as an innocent little offence which makes no direct victims nor apparent damages.

Fraude assurance Nevertheless, the frauds have a great impact on the insurance activity and the honest insured.

Fraud is an offence punishable by the law. The offenders are liable to heavy fines and possible jail time. Overview of the most common frauds.

How to mislead an insurance?

Based on the variety of insurance fraudulent acts, we can classify the fraud techniques under three main categories:

The subscription fraud :

This category includes all attempts to decrease the premium: Identity theft, misrepresentation of risk, undervalued capitals, erroneous risk situations, misrepresentation of accident record, reduced risk dangerousness, etc...

Fraud upon claim occurrence

This category includes four main methods:

Overstatement of the amount of the claim: It is one of the most common methods which consists in requesting a higher invoice to the auto mechanic or dentist or optician,etc…
Claim planning: It is a grave offence ranging from setting fire to a property to murdering in order to benefit from the insured capital. In this kind of offences, a third party usually intervenes to commit the offence and provides the insured with an alibi in case of investigation.
Causing a claim: This is a widespread technique in the motor and fire insurances. The defrauder makes an abrupt braking to make the car behind ram into his/her car. In that way, the bumper or taillights having already been damaged may be replaced at the insurer’s expense.
Opportunism: the insured takes advantage of the occurrence of a claim to be compensated for previous damages. The insured does not intend to defraud but takes advantage of the favourable circumstances to recover the sums disbursed for former undue claims.

Fraud by means of over insurance

This technique is mostly used in the health insurance activity. Taking into consideration that the insurance is not intended to enrich the insured, a person may subscribe to several contracts from which they will take advantage to obtain a reimbursement in excess of the actual health care expenses.

Insurance frauds in 2018

Fraud ⁽¹⁾	Country	Defrauder	Fraud amount
Community Recovery Los Angeles	The United States	- Patients' identity theft during subscription. - Exaggerated prescription of drugs and treatments	175 million USD
A natural person	Slovenia	Accident simulation : The defrauder voluntarily cuts his/her hand off	428 000 USD in plus an annuity cover of 3 382 USD
A couple	The United States	Property arsoning	250 000 USD
A mafia gang	Italy	Accident simulation : Gangs recruit fictitious victims who agree to break their own bones and take part in the simulation of road accidents. This process relies on false witnesses and aims at benefiting from the driver's motor third party liability.	171 000 USD on average per victim depending on the severity of the cases
A natural person	The United States	Baby killing by means of codeine overdose. The perpetrators aimed at benefiting from the life insurance to which they subscribed, two weeks before that.	50 000 USD

⁽¹⁾ The names of the people were purposely deleted to preserve the anonymity

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