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According to Yin Huey Yeoh, a research analyst from IBISWorld, the insurance industry in Australia earned $70.1 billion during 2020-21. This is forecasted to increase by 3.4% through to 2026. In such a large and growing industry, the more important it is to assess the risk of potential fraudsters ready to cheat the system such as by deliberately causing minor car accidents or staging house fires.
Did you know that insurance fraud steals at least $1.4 billion yearly from Australian consumers? Insurance fraud can be defined as an illegal act by either the insurer or the policyholder. From the policyholder’s side, insurance fraud involves falsifying information, making exaggerated claims, and using post-dated policies to claim insurance.
Red List is a risk management search and reporting platform, allowing insurance providers and their business insurance policyholders to conduct a more informative background check by performing an instant search of potential customer details.
Let’s discuss the most common insurance fraud schemes in detail.
Healthcare fraud can be defined as a white-collar crime in which a false claim is dishonestly filed to profit from the payments received. The policyholder or the healthcare provider can commit healthcare fraud.
As mentioned above, many types of healthcare fraud are committed by the policyholder and health service providers; let’s see how they differ.
The complex procedures, political situation, and presence of audits and supervision contribute to healthcare fraud.
Workers’ compensation provides benefits to employees. For instance, if an employee gets sick or injured at work, the employer will be responsible for paying their medical expenses and replacing lost wages as a result of missing work.
Workers’ compensation fraud involves providing false information or concealing information to claim workers’ benefits or prevent employees from getting them. Thus, it can be committed by an employer, employee, and healthcare provider.
Among the most common types of insurance fraud, auto insurance tops the list. Recent modelling conducted by Verisk, a leading source of insurance risk information, estimated in 2016 that auto insurers lost at least $29 billion annually to “information failures and fraudulent practices.”
Auto insurance protects you against financial loss in the event of an accident or theft. Auto insurance covers property, such as damage to your car, medical, and legal liability (your responsibility to cover the medical expenses and property damage done by your car).
Auto insurance fraud involves deliberately providing false information to reap the benefits of the insurance. It can range anywhere from false injuries to causing minor car accidents. Let’s discuss some examples below:
Another common type of insurance fraud is identity theft. Identity theft involves unauthorised or attempted use of an existing account, personal information to open a new account, or misuse of personal information for fraud.
The most common form of identity theft is medical ID theft. Medical ID theft ruins a patient’s credit and embeds wrong information in the patient’s medical records, which can take thousands of dollars to clear up.
Overall, 11% of Australians aged 15 years and over (2.1 million) experienced personal fraud in 2020-21, out of which card fraud and scams were most prevalent. Card fraud involves the use of credit, debit, or EFTPOS card details to make purchases or withdraw cash without the account owner’s permission. An estimated 6.9% of Australians aged 15 years and over (1.4 million) experienced card fraud in 2020-21.
Identity theft can be used for multiple purposes, such as applying for housing or income benefits, opening a bank, applying for a credit card, registering a vehicle, or obtaining a loan in your name.
Homeowners’ insurance fraud is when a false, misrepresented, or inflated claim is made on a homeowner or renter’s policy to claim the benefits. These false claims are made to drive up the cost of repairs and damages to far more than their actual worth. Homeowner’s insurance fraud can take many forms, such as:
The Insurance Fraud Bureau of Australia (IFBA) is a functional element of the Insurance Council of Australia that was established to combat insurance fraud in all its forms. It is working with government officials and police to prosecute cases when identified.
Insurers can also mitigate the risk of insurance fraud by using the Red List. The Red List analyses the database to determine if a report has been made about an individual from any previous incidents and provides instant results.
To identify risk in various contexts and protect your assets, reach out to Red Risk Management today.