RFS - Insurance Fraud Leasson

 

Insurance Fraud

While insurance companies are in business to make money for their shareholders, laws and regulations limit the activities of the companies to help protect the consumer and to maintain the competitiveness of the industry. Such oversight does not preclude the consumer from taking responsibility for understanding the policy they are buying. By the same token, while some insurance companies may try to defraud the consumer, some individuals will also try to defraud the insurance company. Both actions are illegal.

Unlike other financial services, insurance is regulated by the individual states. Even so, thanks in part to the efforts of the National Association of Insurance Commissioners NAIC the regulations from state to state show remarkable similarities. Most states have a portion of their executive branch devoted to insurance regulation. The heads of these organizations are referred to as commissioners. Most of these commissioners are appointed by the governor while a few are elected.

In most states the objectives of insurance regulation include: assuring the consumer has insurance available at fair prices and assuring that the insurance company uses honest practices and can financially carry its obligations. In order to do this, state laws allow the insurance commission to approve rates, financially examine insurance companies, license agents and brokers, and mediate issues with insurance claims.

In Georgia, insurance regulation is carried out by the Office of Insurance and Safety Fire Commissioner. The Commissioner's office handles many duties. In your first assignment for this unit, you are going to prepare a presentation that displays all of the responsibilities handled by this office.

Types of Insurance

Ethics: being in accordance with the rules or standards for right conduct or practice, especially the standards of a profession.

Fraud: wrongful or criminal deception intended to result in financial or personal gain.

Ethics and fraud are opposites. Most insurance agents and most insurance policyholders are ethical. However, some insurance agents and some policyholders do commit fraud.

Agent and Insurer Scams

There are a number of ways that an agent or insurer can defraud a consumer including:

Consumer Fraud

According to the National Insurance Crime Bureau, 10% or more of property and casualty insurance claims are fraudulent. Insurance fraud costs insurance companies billions of dollars each year translating into higher insurance premiums, higher taxes, and inflated consumer prices. Other negative impacts result from insurance fraud including:

Insurance fraud is a major crime that imposes significant financial and personal costs on individuals, businesses, government and society as a whole. Insurance fraud is an economic crime costing individuals, business and government billions of dollars a year. But fraud also is a violent crime that can involve murder, personal injury and serious property damage.

Self-Assessment

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