Insurance is big business. Each year, over 7,000 insurance companies rake in more than $1 trillion in premiums from their clients. The sheer size of the insurance industry can off incentives and opportunities for fraudsters to commit crimes.
When considering the impact of insurance fraud in industries other than health care, it's estimated to cost over $40 billion a year. Broken down, that's roughly anywhere from $400 and $700 each year in increased premiums.
So how do all these insurance scams get perpetuated? One primary way is to divert the insurance premium payments to unauthorized employees through embezzlement. This scam is known as premium diversion.
Insurance agents may withhold the premiums from the underwriter and keep the diverted funds themselves. Nothing may be noticed as long as there are no incidents or claims. When claims do get filed despite never having submitted the money for the premiums, generally that's when the fraud gets detected.
Another variation is that unlicensed agents sell premiums but never pay out claims.
Another scam is asset diversion. During mergers and company acquisitions, an employee assumes control of company assets. The individual is typically high up in the chain of command and has access to company funds. They may borrow money to take over a smaller company, then use the assets of that company to pay down their own debts with the acquired funds. Anything that remains gets diverted to the scammer.
Workers' compensation fraud scams also occur with alarming frequency, which is especially troubling for injured workers and their families. The same goes for those who defraud disaster-related funds intended for victims of natural disasters.
While those involved in fraudulent schemes can get quite creative in the ways that they illegally appropriate claimants' funds, the Federal Bureau of Investigation (FBI) and various consumer agencies are wise to their tricks. Also, a Louisville insurance litigation attorney may be able to help you recover your funds when an insurance company decides not to play by the rules.