Insurance in India

Insurance is a subject listed in the concurrent list in the Seventh Schedule to the Constitution of India where both centre and states can legislate. The insurance sector has gone through a number of phases and changes. Since 1999, when the government opened up the insurance sector by allowing private companies to solicit insurance and also allowing foreign direct investment of up to 26%, the insurance sector has been a booming market. However, the largest life-insurance company in India is still owned by the government.

History

In India, insurance has a deep-rooted history. Insurance in various forms has been mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra) and Kautilya (Arthashastra). The fundamental basis of the historical reference to insurance in these ancient Indian texts is the same i.e. pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. The early references to Insurance in these texts has reference to marine trade loans and carriers' contracts.
Insurance in its current form has its history dating back until 1818, when Oriental Life Insurance Company was started by Anita Bhavsar in Kolkata to cater to the needs of European community. The pre-independence era in India saw discrimination between the lives of foreigners (English) and Indians with higher premiums being charged for the latter. In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer.
At the dawn of the twentieth century, many insurance companies were founded. In the year 1912, the Life Insurance Companies Act and the Provident Fund Act were passed to regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the premium-rate tables and periodical valuations of companies should be certified by an actuary. However, the disparity still existed as discrimination between Indian and foreign companies. The oldest existing insurance company in India is the National Insurance Company Ltd., which was founded in 1906. It is in business.
The Government of India issued an Ordinance on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. In 1972 with the General Insurance Business (Nationalisation) Act was passed by the Indian Parliament, and consequently, General Insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973.
The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. Before that, the industry consisted of only two state insurers: Life Insurers (Life Insurance Corporation of India, LIC) and General Insurers (General Insurance Corporation of India, GIC). GIC had four subsidiary companies.
With effect from December 2000, these subsidiaries have been de-linked from the parent company and were set up as independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.

Industry structure

Currently India is a US$41 billion industry. Currently, in India only two million people (0.2 % of the total population of 1 billion) are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. With more and more private companies in the sector, the situation may change soon.

Specialisation

ECGC, ESIC and AIC provide insurance services for niche markets. So, their scope is limited by legislation but enjoy special powers.

Acts

The insurance sector went through a full circle of phases from being unregulated to completely regulated and then currently being partly deregulated. It is governed by a number of acts.
The Insurance Act of 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business.
Life insurance in India was completely nationalized on January 19, 1956, through the Life Insurance Corporation Act. All 245 insurance companies operating then in the country were merged into one entity, the Life Insurance Corporation of India.
The General Insurance Business Act of 1972 was enacted to nationalise the about 100 general insurance companies then and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance and United India Insurance, which were headquartered in each of the four metropolitan cities.
Until 1999, there were no private insurance companies in India. The government then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies. Furthermore, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies.
In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on par with Chartered Accountants, Notaries, Cost & Works Accountants, Advocates, Architects and Company Secretaries.
A minimum capital of US$20 million(Rs.100 Crore) is required by legislation to set up an insurance business.

Authorities

The industry recognises examinations conducted by IAI (for actuaries), III (for agents, brokers and third-party administrators) and IIISLA (for surveyors and loss assessors). TAC is the sole data repository for the non-life industry.
IBAI gives voice for brokers while GI Council and LI Council are platforms for insurers.
AIGIEA, AIIEA, AIIEF, AILICEF, AILIEA, FLICOA, GIEAIA, GIEU and NFIFWI cater to the employees of the insurers.
In addition, there are a dozen Ombudsman offices to address client grievances.

Insurance Education

National Insurance Academy, Pune is apex education and capacity builder institute in India and only one in Africa & Asia. NIA was founded as Ministry of Finance initiative with capital support from the then public insurance companies, both Life (LIC) and Non-Life (GIC, National, Oriental, United & New India). NIA has 32 acre campus & 30+ faculty member imparting training, conducting research and providing consulting services in insurance sector. NIA run 2 year PGDM (Insurance) to mould youth in insurance specialisation.
1 comments
Labels:

Insurance in Australia

Australia has a sophisticated and well-developed insurance market, which can be divided into roughly three components: life insurance, general insurance and health insurance. These markets are fairly distinct, with most larger insurers focusing on only one type, although in recent times several of these companies have broadened their scope into more general financial services, and have faced competition from banks and subsidiaries of foreign financial conglomerates.

Life insurance

Life insurance products sold in Australia include term life insurance, disability income insurance. Australian insurers are unusual in providing a lump sum Total and Permanent Disability insurance. Life insurers also sell superannuation investment products.

Life insurers companies in Australia

Some of the life insurance companies which operate in Australia are:
In addition, life insurance is also sold by friendly societies and credit unions.

General insurance

General insurance products sold in the Australian market can roughly be divided into two classes:
  • Liability insurance such as Compulsory Third Party (CTP) motor insurance, worker's compensation, professional indemnity insurance and public liability insurance, business insurance;
  • Property insurance such as Home and Contents insurance, travel insurance, and comprehensive motor vehicle insurance
Certain types of insurance, such as CTP and worker's compensation, are statutory (i.e. are required by law), and can differ considerably by state.

General insurers

The three large general insurer groups are:
  • Insurance Australia Group (which includes NRMA, RACV, CGU, SGIO)
  • Suncorp (which includes AAMI, GIO, APIA, Just Car, Bingle)
  • QBE Insurance
Other insurers are:
  • Allianz Australia
  • Hollard Insurance (which includes Real Insurance,Guardian Insurance, Aussie, Australian Seniors)
  • Budget Direct (which includes Virgin Money, Australia Post)
  • Wesfarmers (which includes Coles)
  • Calliden Insurance
  • Zurich Insurance
  • Youi Insurance
  • Progressive Direct
Previous insurers include:
  • Promina Group merged with Suncorp in 2007
  • SGIO and SGIC purchased by IAG
  • HIH Insurance collapsed in 2001

Health Insurance

The Australian Government provides a basic universal health insurance, Medicare. Private health insurance in Australia is limited to those services not covered by Medicare or to services provided in private hospitals.
The Australian Taxation system encourages middle to high income earners to take out Private Health Insurance. While most taxpayers pay a 1.5% Medicare Levy, an additional 1% Medicare Levy Surcharge is payable by those taxpayers who earn more than $76,000 and do not have Private Health Insurance.

Industry structure

Life insurers were traditionally mutual companies, but in the 1980s and 1990s many of them demutualised and with a few large exceptions are owned by banks. The large remaining insurers have become “financial services” organisations and now derive the majority of their revenue from superannuation investment products.
General Insurers have a more diverse ownership structure, with more stand alone independent general insurers (although some life insurers do own general insurers).
Health insurers are still predominantly mutuals. The notable exception is Medibank Private, the largest private health insurer in Australia, which is owned by the Australian government.

Regulation

The prudential aspects of general and life insurance (solvency etc.) are regulated by the Australian Prudential Regulatory Authority (APRA). Matters relating to advice or disclosure of insurance products sold are regulated by the Australian Securities and Investments Commission (ASIC). The Australian Competition and Consumer Commission (ACCC) also has a regulatory role with respect to competition law.
In certain states, various bodies also have powers in regulating certain types of statutory insurance. For example, in New South Wales the Motor Accidents Authority regulates Compulsory Third Party motor liability insurance. In many cases these bodies have powers regarding premium rating and reinsurance rules.
Private health insurers are regulated by the Private Health Insurance Administration Council (PHIAC).
The primary federal legislation is:
  • Life Insurance Act 1995 (Life Insurance prudential regulation)
  • Insurance Act 1973 (General Insurance prudential regulation)
  • Health Insurance Act 2007 (Health insurance prudential regulation and consumer protection)
  • Corporations Act 2001 ((especially Ch 7) consumer protection in respect of insurance policies)
  • Insurance Contracts Act 1984 (consumer protection in respect of insurance policies)

Industry bodies

The main industry bodies are:
  • Insurance Council of Australia which represents general insurers.
  • Financial Services Council
  • Australian and New Zealand Institute of Insurance and Finance
  • Underwriting Agencies Council http://www.uac.org.au
  • Institute of Actuaries of Australia
  • ACORD  which is the insurance industry global standards organisation. ACORD has standards for personal and commercial lines and has been working with the Australian General Insurers to develop those XML standards, standard applications for insurance, and certificates of currency.
0 comments
Labels:

U.S. insurance companies

This is a list of insurance companies based in the United States. These are companies with a strong national or regional presence having insurance as their primary business.

Life Annuity

  • Allstate
  • American Family Insurance
  • American Fidelity Assurance
  • Amica Mutual Insurance
  • Aviva
  • AXA Equitable Life Insurance Company
  • Bankers Life and Casualty
  • Conseco
  • Farmers Insurance Group
  • Fidelity
  • Genworth Financial
  • ING Group
  • Jackson National Life
  • John Hancock Insurance
  • Lincoln National Corporation
  • MetLife
  • Mutual of Omaha
  • Nationwide Mutual Insurance Company
  • Old Mutual
  • Pacific Life
  • Protective Life
  • Prudential Financial
  • Standard Insurance Company
  • State Farm Insurance
  • Thrivent Financial for Lutherans
  • TIAA-CREF
  • Transamerica Corporation
  • UNIFI Companies
  • United of Omaha
  • Western & Southern Financial Group

Health insurance (major medical insurance)

  • AARP
  • Aetna
  • American Family Insurance
  • American National Insurance Company
  • Amerigroup
  • Anthem Blue Cross and Blue Shield
  • Assurant
  • Blue Cross and Blue Shield Association
  • Celtic Insurance Company, subsidiary of Centene Corporation
  • Centene Corporation
  • Cigna
  • Coventry Health Care
  • EmblemHealth
  • Fortis
  • Golden Rule Insurance Company
  • Group Health Cooperative
  • GHI
  • Health Net
  • HealthMarkets
  • HealthSpring
  • Highmark
  • Humana
  • Independence Blue Cross
  • Kaiser Permanente
  • LifeWise Health Plan of Oregon
  • Medical Mutual of Ohio
  • Molina Healthcare
  • Premera Blue Cross
  • Principal Financial Group
  • The Regence Group
  • Shelter Insurance
  • Thrivent Financial for Lutherans
  • UnitedHealth Group
  • Unitrin
  • Universal American Corporation
  • WellCare Health Plans
  • WellPoint

Medicare

  • Aetna
  • American Family Insurance
  • Bankers Life and Casualty
  • Conseco
  • Mutual of Omaha
  • Premera Blue Cross
  • Thrivent Financial for Lutherans
  • Kaiser Permanente

Supplemental insurance

  • Aflac
  • Allstate
  • American Fidelity Assurance
  • Colonial Life & Accident Insurance Company
  • Conseco
  • Liberty National Life Insurance Company
  • Mutual of Omaha

Supplemental health insurance

  • Aflac
  • Allstate
  • MEGA Life and Health Insurance
  • State Farm Insurance
  • AARP

Travel insurance

  • Access America, a brand of Mondial Assistance Group
  • International Medical Group
  • Seven Corners, Inc.
  • Travel Guard
  • Usa-Assist Worldwide Protection
  • Aeromedevac
  • Missionary Travel Association
  • MediMundi Travel Directory

Workers' compensation

Assist Card
  • Accident Fund
  • American International Group (AIG)
  • CompWest
  • Erie Insurance Group
  • Hanover Insurance
  • The Hartford
  • Liberty Mutual
  • Merchants Insurance Group
  • Missouri Employers Mutual
  • Nationwide Mutual Insurance Company
  • Penn National Insurance
  • Sentry Insurance
  • State Accident Insurance Fund
  • State Compensation Insurance Fund
  • State Farm Insurance
  • Third Coast Underwriters (3CU)
  • United Heartland
  • WellPoint
  • Zenith Insurance Company 
http://en.wikipedia.org/wiki/List_of_United_States_insurance_companies
    0 comments
    Labels:

    21st Century Insurance

    21st Century Insurance is an auto insurance company and is wholly owned by the Farmers Insurance Group of Companies®. They are headquartered in Wilmington, Delaware, and provide private passenger auto insurance in 48 states and the District of Columbia.

    History

    21st Century Insurance was founded in 1958 by Louis W. Foster as an inter-insurance exchange offering auto insurance, primarily in California. Initially, the company was called 20th Century Insurance.
    The company was purchased in 2005 by AIG and then later sold in 2009 to Farmers Insurance Group of Companies®.

    Type:    Subsidiary
    Industry :      Insurance
    Founded:               Los Angeles, California, U.S. (1958)

    Headquarters:        Wilmington, Delaware, United States
    Area served :          U.S.
    Key people:             Anthony J. DeSantis, President and CEO
    Products:                 Auto Insurance
    Parent:                     Farmers Insurance Group
    Website:                   http://www.21st.com
    0 comments
    Labels:

    Detecting insurance fraud

    The detection of insurance fraud generally occurs in two steps. The first step is to identify suspicious claims that have a higher possibility of being fraudulent. This can be done by computerized statistical analysis or by referrals from claims adjusters or insurance agents. Additionally, the public can provide tips to insurance companies, law enforcement and other organizations regarding suspected, observed, or admitted insurance fraud perpetrated by other individuals. Regardless of the source, the next step is to refer these claims to investigators for further analysis.
    Due to the sheer number of claims submitted each day, it would be far too expensive for insurance companies to have employees check each claim for symptoms of fraud.Instead, many companies use computers and statistical analysis to identify suspicious claims for further investigation. There are two main types of statistical analysis tools used: supervised and unsupervised. In both cases, suspicious claims are identified by comparing data about the claim to expected values. The main difference between the two methods is how the expected values are derived.
    In a supervised method, expected values are obtained by analyzing records of both fraudulent and non-fraudulent claims. According to Richard J. Bolton and David B. Hand, both of Imperial College in London, this method has some drawbacks as it requires absolutely certainty that those claims analyzed are actually either fraudulent or non-fraudulent, and because it can only be used to detect types of fraud that have been committed and identified before.
    Unsupervised methods of statistical detection, on the other hand, involve detecting claims that are abnormal. Both claims adjusters and computers can also be trained to identify “red flags,” or symptoms that in the past have often been associated with fraudulent claims. Statistical detection does not prove that claims are fraudulent; it merely identifies suspicious claims that need to be investigated further.
    Fraudulent claims can be one of two types. They can be otherwise legitimate claims that are exaggerated or “built up,” or they can be false claims in which the damages claimed never actually occurred. Once a built up claim is identified, insurance companies usually try to negotiate the claim down to the appropriate amount. Suspicious claims can also be submitted to “special investigative units”, or SIUs, for further investigation. These units generally consist of experienced claims adjusters with special training in investigating fraudulent claims.These investigators look for certain symptoms associated with fraudulent claims, or otherwise look for evidence of falsification of some kind. This evidence can then be used to deny payment of the claims or to prosecute fraudsters if the violation is serious enough.
    Determining fraud committed by the health insurance companies can sometimes be found be comparing revenues from premiums paid against the expenditure by the health insurance companies on claims.
    As an example, in 2006 the Harris County Medical Society, in Texas, had a health insurance rate increase of 22 percent for “consumer-driven” health plan from Blue Cross and Blue Shield of Texas. This was despite the fact that during the previous year Blue Cross had paid out only 9 percent of the collected premium dollars for claims.

    Legislation

    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. Some major developments are listed below:

    United States

    • Insurance Fraud is specifically classified as a crime in all states, though a minority of states only criminalize certain types (i.e. Oregon only outlaws Worker Compensation and Property Claim fraud).
    • 19 states require mandatory insurer fraud plans. This requires companies to form programs to combat fraud and in some cases to develop investigation units to detect fraud.
    • 41 states have fraud bureaus. These are law enforcement agencies where “investigators review fraud reports and begin the prosecution process.”
    • Section 1347 of Title 18 of the United States Code states that whoever attempts or carries out a “scheme or artifice” to “defraud a health care benefit program” will be “fined under this title or imprisoned not more than 10 years, or both.” If this scheme results in bodily injury, the violator may be imprisoned up to 20 years, and if the scheme results in death the violator may be imprisoned for life.

    Canada

    • The Insurance Crime Prevention Bureau was founded in 1973 to help fight insurance fraud. This organization collects information on insurance fraud, and also carries out investigations. Approximately one third of these investigations result in criminal conviction, one third result in denial of the claim, and one third result in payment of the claim.
    • British Columbia’s Traffic Safety Statutes Amendment Act of 1997 states that any person who submits a motor vehicle insurance claim that contains false or misleading information may on the first offence be fined C$25,000, imprisoned for two years, or both. On the second offense, that person may be fined C$50,000, imprisoned for two years, or both.

    United Kingdom

    • A major portion of the Financial Services Act of 1986 was intended to help prevent fraud.
    • The Serious Fraud Office, set up in 1987 under the Criminal Justice Act, was established to “improve the investigation and prosecution of serious and complex fraud.”
    • The Fraud Act 2006 specifically defines fraud as a crime. This act defines fraud as being committed when a person “makes a false representation,” “fails to disclose to another person information which he is under a legal duty to disclose,” or abuses a position in which he or she is “expected to safeguard, or not to act against, the financial interests of another person.” This act also defines the penalties for fraud as imprisonment up to ten years, a fine, or both.
    0 comments
    Labels:

    Types of insurance fraud

    Life insurance Fraud

    An example of life insurance fraud is the John Darwin disappearance case, an ongoing investigation into the faked death of British former teacher and prison officer John Darwin, who turned up alive in December 2007, five years after he was thought to have died in a canoeing accident. Darwin was reported as "missing" after failing to report to work following a canoeing trip on March 21, 2002. He reappeared on December 1, 2007, claiming to have no memory of the past five years.

    Health care insurance Fraud

    According to The Coalition Against Insurance Fraud, health fraud depletes taxpayer-funded programs like Medicare, and may victimize patients in the hands of certain doctors. Some scams involve double-billing by doctors who charge insurers for treatments that never occurred, and surgeons who perform unnecessary surgery.
    According to Roger Feldman, Blue Cross Professor of Health Insurance at the University of Minnesota, one of the main reasons that medical fraud is such a prevalent practice is that nearly all of the parties involved find it favorable in some way. Many physicians see it as necessary to provide quality care for their patients. Many patients, although disapproving of the idea of fraud, are sometimes more willing to accept it when it affects their own medical care. Program administrators are often lenient on the issue of insurance fraud, as they want to maximize the services of their providers.
    The most common perpetrators of healthcare insurance fraud are health care providers. One reason for this, according to David Hyman, a Professor at the University of Maryland School of Law, is that the historically prevailing attitude in the medical profession is one of “fidelity to patients”. This incentive can lead to fraudulent practices such as billing insurers for treatments that are not covered by the patient’s insurance policy. To do this, physicians often bill for a different service, which is covered by the policy, than that which was rendered.
    Another motivation for insurance fraud in the healthcare industry, just as in all other types of insurance fraud, is a desire for financial gain. 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.Physicians use several fraudulent techniques to achieve this end. These can include “up-coding” or “upgrading,” which involve billing for more expensive treatments than those actually provided; providing and subsequently billing for treatments that are not medically necessary; scheduling extra visits for patients; referring patients to another physician when no further treatment is actually necessary; "phantom billing," or billing for services not rendered; and “ganging,” or billing for services to family members or other individuals who are accompanying the patient but who did not personally receive any services.
    Perhaps the greatest total dollar amount of fraud is committed by the health insurance companies themselves. There are numerous studies and articles detailing examples of insurance companies intentionally not paying claims and deleting them from their systems, denying and cancelling coverage, and the blatant underpayment to hospitals and physicians beneath what are normal fees for care they provide.Although difficult to obtain the information, this fraud by insurance companies can be estimated by comparing revenues from premium payments and expenditures on health claims.

    Automobile insurance Fraud

    The Insurance Research Council estimated that in 1996, 21 to 36 percent of auto-insurance claims contained elements of suspected fraud. There is a wide variety of schemes used to defraud automobile insurance providers. These ploys can differ greatly in complexity and severity. Richard A. Derrig, vice president of research for the Insurance Fraud Bureau of Massachusetts, lists several ways that auto-insurance fraud can occur.
    Examples of soft auto-insurance fraud can include filing more than one claim for a single injury, filing claims for injuries not related to an automobile accident, misreporting wage losses due to injuries, or reporting higher costs for car repairs than those that were actually paid. Hard auto-insurance fraud can include activities such as staging automobile collisions, filing claims when the claimant was not actually involved in the accident, submitting claims for medical treatments that were not received, or inventing injuries. Hard fraud can also occur when claimants falsely report their vehicle as stolen. Soft fraud accounts for the majority of fraudulent auto-insurance claims.
    Another example is that a person may illegally register their car to a location that would net them cheaper insurance rates than where they actually live, sometimes called "rate evasion". For example, some drivers in Brooklyn drive with Pennsylvania license plates because registering their car in a rural part of Pennsylvania will cost a lot less than registering it in Brooklyn. Another form of automobile insurance fraud, known as "fronting," involves registering someone other than the real primary driver of a car as the primary driver of the car. For example, parents might list themselves as the primary driver of their children's vehicles to avoid young driver premiums.
    "Crash for cash" scams may involve random unaware strangers, set to appear as the perpetrators of the orchestrated crashes. Such techniques are the classic rear-end shunt (the driver in front suddenly slams on the brakes, eventually with brake lights disabled), the decoy rear-end shunt (when following one car, another one pulls in front of it, causing it to brake sharply, then the first car drives off) or the helpful wave shunt (the driver is waved in to a line of queuing traffic by the scammer who promptly crashes, then denies waving)
    Organized crime rings can also be involved in auto-insurance fraud, sometimes carrying out schemes that are very complex. An example of one such ploy is given by Ken Dornstein, author of Accidentally, on Purpose: The Making of a Personal Injury Underworld in America. In this scheme, known as a “swoop-and-squat,” one or more drivers in “swoop” cars force an unsuspecting driver into position behind a “squat” car. This squat car, which is usually filled with several passengers, then slows abruptly, forcing the driver of the chosen car to collide with the squat car. The passengers in the squat car then file a claim with the other driver’s insurance company. This claim often includes bills for medical treatments that were not necessary or not received.
    An incident that took place on Golden State Freeway June 17, 1992, brought public attention to the existence of organized crime rings that stage auto accidents for insurance fraud. These schemes generally consist of three different levels. At the top, there are the professionals--doctors or lawyers who diagnose false injuries and/or file fraudulent claims and these earn the bulk of the profits from the fraud. 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. These participants at the bottom-rung of the scheme are desperate people (poor immigrants or others in need of quick cash) who are paid around $1000 USD to place their bodies in the paths of cars and trucks, playing a kind of Russian roulette with their lives and those of unsuspecting motorists around them. According to investigators, cappers usually hire within their own ethnic groups. What makes busting these staged-accident crime rings difficult is how quickly they move into jurisdictions with lesser enforcement, after a crackdown in a particular region. As a result, in the US several levels of police and the insurance industry have cooperated in forming task forces and sharing databases to track claim histories.
    In the United Kingdom, there is an increasing incidence of false whiplash claims to car insurance companies from motorists involved in minor car accidents (for instance; a shunt). Because the mechanism of injury is not fully understood, A&E doctors have to rely on a patient's external symptoms (which are easy to fake). Resultingly, "no win no fee" personal injury solicitors exploit this "loophole" for easy compensation money (often a £2500 payout). Ultimately this has resulted in increased motor insurance premiums, which has had the knock-on effect of pricing younger drivers off the road.

    Property insurance Fraud

    Possible motivations for this can include obtaining payment that is worth more than the value of the property destroyed, or to destroy and subsequently receive payment for goods that could not otherwise be sold. According to Alfred Manes, the majority of property insurance crimes involve arson.One reason for this is that any evidence that a fire was started by arson is often destroyed by the fire itself. According to the United States Fire Administration, in the United States there were approximately 31,000 fires caused by arson in 2006, resulting in losses of $755 million. Example: The Moulin Rouge in Las Vegas was struck by arson twice within 6 years

    Council compensation claims

    The fraud involving claims from the councils' insurers suppose staging damages blamable on the local authorities (mostly falls and trips on council owned land) or inflating the value of existing damages.
    0 comments
    Labels:

    Insurance fraud

    Insurance fraud is any act committed with the intent to fraudulently obtain payment from an insurer.
    Insurance fraud has existed ever since the beginning of insurance as a commercial enterprise.Fraudulent claims account for a significant portion of all claims received by insurers, and cost billions of dollars annually. Types of insurance fraud are very diverse, and occur in all areas of insurance. Insurance crimes also range in severity, from slightly exaggerating claims to deliberately causing accidents or damage. Fraudulent activities also affect the lives of innocent people, both directly through accidental or purposeful injury or damage, and indirectly as these crimes cause insurance premiums to be higher. Insurance fraud poses a very significant problem, and governments and other organizations are making efforts to deter such activities

    Causes

    The “chief motive in all insurance crimes is financial profit.”Insurance contracts provide both the insured and the insurer with opportunities for exploitation. One reason that this opportunity arises is in the case of over-insurance, when the amount insured is greater than the actual value of the property insured. This condition can be very difficult to avoid, especially since an insurance provider might sometimes encourage it in order to obtain greater profits. This allows fraudsters to make profits by destroying their property because the payment they receive from their insurers is of greater value than the property they destroy.
    Insurance companies are also susceptible to fraud because false insurance claims can be made to appear like ordinary claims. This allows fraudsters to file claims for damages that never occurred, and so obtain payment with little or no initial cost.
    The most common form of insurance fraud is inflating of loss. 

    Losses due to insurance fraud

    It is virtually impossible to determine an exact value for the amount of money stolen through insurance fraud. Insurance fraud is designed to be undetectable, unlike visible crimes such as robbery or murder. As such, the number of cases of insurance fraud that are detected is much lower than the number of acts that are actually committed.The best that can be done is to provide an estimate for the losses that insurers suffer due to insurance fraud. The Coalition Against Insurance Fraud estimates that in 2006 a total of about $80 billion was lost in the United States due to insurance fraud.According to estimates by the Insurance Information Institute, insurance fraud accounts for about 10 percent of the property/casualty insurance industry’s incurred losses and loss adjustment expenses.The National Health Care Anti-Fraud Association estimates that 3% of the health care industry’s expenditures in the United States are due to fraudulent activities, amounting to a cost of about $51 billion. Other estimates attribute as much as 10% of the total healthcare spending in the United States to fraud—about $115 billion annually.In the United Kingdom, the Insurance Fraud Bureau estimates that the loss due to insurance fraud in the United Kingdom is about £1.5 billion ($3.08 billion), causing a 5% increase in insurance premiums. The Insurance Bureau of Canada estimates that personal injury fraud in Canada costs about C$500 million annually.


    Hard vs. soft fraud

    Insurance fraud can be classified as either hard fraud or soft fraud.
    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 in order to receive payment for damages. Criminal rings are sometimes involved in hard fraud schemes that can steal millions of dollars.
    Soft fraud, which is far more common than hard fraud, is sometimes also referred to as opportunistic fraud. This type of fraud consists of policyholders exaggerating otherwise legitimate claims. For example, when involved in a collision an insured person might claim more damage than was really done to his or her car. Soft fraud can also occur when, while obtaining a new insurance policy, an individual misreports previous or existing conditions in order to obtain a lower premium on their insurance policy.
    0 comments
    Labels: