Insurance fraud is a criminal offence with dire consequences on the perpetrators. Put simply, insurance fraud just isn’t worth it at all.
This blog aims to shed light on the gravity and consequences of fraudulent insurance claims, exploring the criminal motivations behind such actions and the grave consequences that perpetrators risk.
What Is Insurance Fraud?
Insurance fraud comes with many facets and happens when someone intentionally or accidentally provides false or incomplete information to an insurance company with the intention of benefiting in some way. Insurance fraud includes both making a fraudulent claim or a dishonest application.
With fraudulent insurance claims, the policyholders or beneficiaries attempt to obtain an undeserved or exaggerated payout by deceptive means. It is a misrepresentation of facts with the intention of wrongfully gaining. This can involve creating illegitimate insurance policies or making false claims against an existing policy.
Common Insurance Frauds
Providing inaccurate information on policy documents, failing to report material changes of circumstances, making exaggerated claims or entirely false claims can all qualify as being the offence of insurance fraud.
Some examples of insurance fraud, focusing on funeral/life insurance, include:
- staging a crime e.g. killing of policyholder or co-life to benefit from insurance claims,
- falsifying and submitting death claims for individuals who are still alive,
- falsifying and misrepresenting the cause of death,
- falsifying and misrepresenting when death happened,
- adding someone on an policy when there is no insurable interest with the intention of killing or getting them killed for financial gain,
- adding to policy and claiming for a co-life who is already deceased,
- continuing to pay premiums for deceased person until after waiting period so that they qualify for payout,
- reinstating a lapsed policy in order to claim or because a policyholder or co-life is diagnosed with terminal illness
- exaggerating the extent of losses to obtain more money,
- making fake claims to receive insurance pay-outs,
- deliberately damaging possessions to receive insurance pay-outs,
- non-disclosure like providing inaccurate information to get a better insurance premium,
- non-disclosure like providing incomplete information to claim a larger pay-out
- failing to report changes in circumstances that would impact the cost or validity of insurance.
Submitting a fraudulent insurance claim can have serious consequences and is a criminal offence which is taken very seriously by both insurance companies and the police.
In addition to invalidating your coverage, an insurance fraud case can lead to prosecution and a prison sentence if you are found guilty and convicted. Sentences can be anything from a community service order to 6 months or more imprisonment. You may also be asked to pay a fine.
If you are found to be guilty of leading a criminal ring with the goal of getting payouts from insurance firms, you are likely to be handed a stiffer sentence. News stories frequently highlight individuals and criminal organisations being prosecuted for insurance fraud. If you have been accused of insurance fraud you need to contact a fraud solicitor without delay.
At Diaspora Insurance, treating customers fairly is one of our core values and when dealing with bereaved families our biggest focus is to deliver immediate financial intervention. This is so because the Diaspora Funeral Cash Plan is a bespoke cover specifically designed to provide peace of mind and financial support to families when they face the emotional and financial burden of losing their loved one.
Criminal Minds – Reasons For Insurance Fraud
There are several reasons why individuals might engage in fraudulent activities when filing insurance claims:
- Financial desperation: some policyholders facing financial difficulties see fraudulent claims as a way to have easy money.
- Lack of awareness: sometimes, policyholders may unintentionally submit fraudulent claims due to a misunderstanding of policy terms.
- Financial greed: sometimes it’s purely out greed that people engage in fraudulent activities for monetary gain.
- Unethical agents: unscrupulous insurance agents or brokers may encourage or participate in fraudulent schemes.
- Influence of others: some people may become involved in insurance fraud schemes due to pressure or influence from friends, family members, or criminal networks.
Whatever the reason for insurance fraud it is ultimately not worth it as the law will always likely catch up.
Insurance companies such as Diaspora Insurance and many others invest significant resources in detecting and preventing fraud to protect honest policyholders and maintain the integrity of the insurance system.
With insurers using new state-of-the-art technology, sharing databases, and with fraud specialists on speed dial, one insurance claim scam is detected every five minutes in the UK.
Consequences of Fraudulent Insurance Claims
Insurance fraud is a serious criminal offence and perpetrators face serious consequences that include the following:
Criminal charges and imprisonment: committing insurance fraud is a criminal offence that could lead to imprisonment.
Criminal charges and legal penalties: if convicted of insurance fraud, individuals can face huge fines, if not imprisonment.
- Loss of insurance cover: engaging in fraudulent activities can lead to the cancellation of the insurance policy, and or forfeiture of premiums. If the insurance company discovers that a claim was fraudulent, they may void the policy, leaving the policyholder without coverage for any legitimate future claims.
- Difficulty obtaining future insurance: Individuals with a history of insurance fraud may find it challenging to obtain insurance coverage in the future. Insurance companies may view them as high-risk applicants and either refuse coverage or charge significantly higher premiums.
- Civil lawsuits: In addition to criminal consequences, insurance companies have the right to pursue civil litigation against those involved in fraudulent claims to recover any money paid out due to the fraud, as well as legal costs.
- Reputation damage: Engaging in fraudulent activities can damage an individual’s reputation and credibility. In some cases, individuals involved in insurance fraud may find it challenging to secure employment or maintain professional relationships.
- Financial hardship: While the primary motivation for fraudulent funeral claims is financial gain, these claims often result in financial difficulties and legal expenses for those involved. The consequences of getting caught can outweigh any financial gain.
- Impact on beneficiaries: If the person involved in the fraudulent claim is not the policyholder but a beneficiary, they may also face legal and financial consequences. Beneficiaries could lose the insurance payout and may be held accountable for their involvement.
- Criminal records: a conviction for insurance fraud can result in a criminal record, which can have long-term implications on an individual’s life, including difficulties finding employment, obtaining loans, or renting housing and even deportation in some instances.
Engaging in fraudulent funeral claims is not only unethical but also illegal. It can have severe consequences, both legally and financially.
Individuals seeking assistance with funeral expenses should explore legitimate options, such as burial assistance programmes, government benefits, or properly acquired insurance coverage, rather than resorting to fraudulent insurance claims.
The Cost Of Insurance Fraud
Globally, fraudulent insurance claims cost trillions of dollars.
According to the Association of British Insurers (ABI), in 2019, the number of insurance frauds detected in the UK topped 867,000 and dishonest applications made up the bulk of fraudulent insurance frauds detected with approximately 760,000 cases (88 percent).
In the same year, the annual value of insurance fraud was £1.2 billion, that is, a whopping 300 fraud cases, worth £3.3 million every day. If fraudulent applications are included the number of detected insurance frauds jumps to nearly 2,400 cases a day.
The Coalition Against Insurance Fraud (CAIF), USA estimates the total losses due to insurance fraud across the country are $308.6 billion annually.
Insurance fraud costs an estimated $900 per consumer, mostly due to increased premiums as a result of fraud. The most costly category of insurance fraud is health care insurance fraud (including Medicaid and Medicare insurance fraud), which costs consumers an estimated $105 billion annually, followed by life insurance fraud ($74.7 billion) and property and casualty insurance fraud ($45 billion).
Insurance Fraud Affects Everyone
Insurance fraud is a very serious crime that impacts society at large. Valuable public resources such as the NHS and law enforcement are wasted on tackling fraudulent crimes, wasting taxpayers’ money.
It also affects upstanding policyholders, who are forced to pay higher insurance premiums because the costs of these fraudulent claims are consequently passed on to customers.
Sadly, in the UK insurance industry an average insurance policy costs an estimated £40 a year more than it should be due to fraudulent claims bumping up the prices. Therefore, everyone loses out—everyone is a victim.
In conclusion:
Insurance covers like the bespoke Diaspora Funeral Cash Plan are offered on a guaranteed acceptance basis and come with a lot of benefits as listed below and there is absolutely no need to engage in short-cuts, claims fraud and risking a criminal record or imprisonment:
- Guaranteed acceptance of all qualifying nationalities,
- No intrusive medical questions as all,
- Immediate pay-out on proof of death, no need to wait for probate.
- Worldwide cover, it’s a protection without borders
- Peace of mind, guaranteed!
- Celebratedlife, guaranteed!
- No more bereaving and begging
- Personal and family dignity, protected!
- Authorised and regulated by the Financial Conduct Authority (FCA), UK
Needless to say, insurance is based on the principle of utmost good faith and it is always important to cover the risk before it manifests.
Non-disclosure of known facts is the biggest reason why insurance claims are repudiated or rejected. It is therefore important to disclose all material information even if it means paying a higher premium so that future claims are honoured.
Lastly, don’t get caught up in insurance fraud because you are likely to be caught and ultimately it’s not worth it as you may end up with a criminal record or worse still imprisonment. If you live in a foreign country, you may end up with a deportation.
