Studies suggest that the greatest total dollar amount of fraud is committed by the health insurance companies themselves, intentionally not paying claims and deleting them from their systems,[2] and denying and cancelling coverage.
[4] Long before the rise of the modern insurance industry, an epigram by the Roman poet Martial, set in the Roman Empire during the first century AD, illustrates how crimes such as arson might be motivated by profit:[5] The "chief motive in all insurance crimes is financial profit".
[6] Those who commit insurance fraud may view it as a low-risk, lucrative enterprise as compared to other forms of criminal activity.
[10] According to the FBI, non-health insurance fraud costs an estimated $40 billion per year, which increases the premiums for the average U.S. family between $400 and $700 annually.
[1] Another study of all types of fraud committed in the United States insurance institutions (property-and-casualty, business liability, healthcare, social security, etc.)
[14] Hard fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto theft, or fire that is covered by their insurance policy[15] in order to claim payment for damages.
The UK Insurance Research Council estimated that in 1996, 21 to 36 percent of auto-insurance claims contained elements of suspected fraud.
[17] Schemes used to defraud automobile insurance providers differ greatly in complexity and severity, and include both individual and organized efforts.
[22] Insurance fraud may also include such actions as a pedestrian jumping in front of a car, then seeking compensation for claimed injuries.
At the top, there are lawyers who file fraudulent claims, supported by doctors who fabricate or exaggerate diagnoses and treatment records.
Next are the "cappers" or "runners", the middlemen who obtain the cars to crash, farm out the claims to the professionals at the top, and recruit participants.
Member fraud consists of such acts as the making of claims on behalf of ineligible members or their dependents, making false statements on enrollment forms, concealing preexisting conditions that could affect the scope of coverage or cost of the policy, and failure to disclose claims that were a result of a work-related injury in violation of the terms of a health insurance policy.
[32] Public healthcare programs such as Medicare and Medicaid are especially conducive to fraudulent activities, as they are often run on a fee-for-service structure.
[2][3] When detected, health insurance fraud can result in civil liability as well as criminal penalties, and potential action against a healthcare provider's license.
[38] For example, in the case of John Darwin, a former teacher and prison office turned up alive five years after he was purported to have died in a canoeing accident, after his family had made a successful claim on his life insurance.
Similarly, former British Government minister John Stonehouse reportedly missing in 1974 from a beach in Miami after the acquisition of multiple life insurance policies, but was discovered living under an assumed name in Australia.
Employer fraud involves efforts to avoid payment of unemployment taxes, or the creation of a false business entity through which fraudulent employee claims are submitted.
[46] The detection of insurance fraud usually begins with the identification of suspicious claims, those that have a higher possibility of being fraudulent.
The goal of the investigation and interview is to verify the value of the claim and, should fraud be identified, collect evidence of the insured party's intent to defraud.
[55] National and local governments, especially in the last half of the twentieth century, have recognized insurance fraud as a serious crime, and have made efforts to punish and prevent this practice.
In British Columbia, any person who submits a motor vehicle insurance claim that contains false or misleading information may be fined, imprisoned, or both.
The federal government has passed a statute that criminalizes the act of defrauding a health care benefit plan, Section 1347 of Title 18 of the United States Code.