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The Effects Of Insurance Fraud. Ever since insurance was invented, so was insurance fraud. The fraud which is connected to insurance fraud comes in different types, which includes life insurance fraud and auto fraud. This article will provide a general overview, while discussing the impact of fraud on society. The gain of money is probably the common reason why a person would commit fraud. It is easy to exploit those people who commit fraud since there are lots of policies involved in fraud. Commonly, insurance policies are exploited by individuals claiming more loss than actually occurred, or inflating the value of the item lost. Insurance fraud comes in two classifications which are known to be soft fraud and hard fraud. Among the two classifications of fraud, the common one is the soft fraud or can also be called as opportunistic fraud. When an insure party is known to be a legitimate claim, then this type of fraud will occur. Soft fraud, for example, happens when an insured individual is involved in a car accident and claims that more damage was done to the vehicle than is true. Soft fraud can happen at the start of a new insurance policy, when an individual purchasing a policy misrepresents their actually situation in order to get a lower premium. An example of this is if someone is buying a car insurance policy but lies about the number of miles on the vehicle to obtain a lower premium.
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Hard fraud is when someone plans a loss to receive an insurance payout. This kind of fraud usually happens to a stolen vehicle. Different forms of crimes were usually involved in hard fraud.
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It is true that the most common fraud is the auto insurance fraud. Did you know that in the year 1996, around 36 percent of auto insurance claims were fraudulent in some way. Aside from everything that is stated above, a fraud can also be considered when a person claims an accident that did not actually happened, or maybe, if a person registered his or her automobile to a place where the insurance in cheaper. For instance, if a person lives in a major city, it is more expensive to insure the car, so they will register it with a suburban address in order to obtain a lower premium.