Question

What are the two general categories used to classify types of insurance fraud and what are some of the real case examples?

Answer 1

Application Fraud: When a person knowingly provide incorrect information to an insurance company when applying for a policy, this type of activity comes under application fraud. This type of misrepresentation of information are the cause of many disputed life insurance claims. When somebody applies for the insurance, he gives two types of information. First, the information the person provides during the application form fill up. Second, the information collected by the agent from the medical records and examination of the applicant.

The insurance underwriters review the application and verify all the details submitted by the applicant. If there is any mismatch between the information provided by the applicant and the medical examination record, then the insurance company may reject the application on the ground of information misrepresentation. So when applying for insurance, it is necessary to provide accurate and relevant information.

For example, somebody provides information that he has no heart problems and he does not smoke and take drinks. But when medical report came, the insurance company got to know that he is smoking and taking liquor for a long time and he has chronic heart problems. In that case, the insurance company may reject the application or charge a high amount of premium than the initial amount.

2. Claims Fraud: Claims fraud is a category of fraud under which various types of insurance fraud are included. One basic type of insurance fraud under this category is death fraud. There are some wicked people who attempt to fake their own death or the death of their loved one in order to get life insurance benefit.

Another example of this type of fraud could be, the beneficiary killing the insured person to get the insurance benefits. Although it is a rare case but it happens, it is illegal and may result in prosecution.