Fraud involves misrepresentation of a party, which causes damages or losses to another party. In terms of insurance fraud, individuals obtain payouts from insurance entities through misrepresentation or deceitful means. The conditions for insurance fraud fundamentally entail intentional misrepresentation with the goal of deriving monetary gain from it.
Since the beginning of the commercialization of insurance, many claims are filed globally that are considered to be insurance fraud. The insurance business has had considerable losses annually due to the inability to separate real insurance claims from fraudulent ones. Despite the existence of insurance agents to determine the authenticity of each insurance claim, it is still difficult to ascertain due to the increasing resources that can mask an insurance fraud.
There are 2 types of insurance fraud, which differ based on the severity of the fraud. Soft fraud is when an exaggeration is made based on an actual, legitimate claim. This type of fraud is committed when an individual involved in an insurance payout derives more benefits than what is needed. The second type of insurance fraud is hard fraud wherein in individuals have no legitimate claim to make. Such individuals obtain insurance payout through made-up situations or set-ups.
A claims adjuster is the insurance professional that reviews claims that insurance companies may consider possibly fraudulent. An investigation is launched by the claims adjuster wherein the ultimate outcome is a payout or claim denial. Customers who are denied but have filed legitimate claims may bring the case to a court in order to receive just compensation.