When you think of insurance fraud, you probably think of people who fake their deaths or intentionally burn down houses in order to collect benefits. While those things can and their insurance companies.
After a devastating loss, such as loss of your home from a fire or natural disaster, you’re likely to be emotional, desperate for help, and not thinking clearly. This makes you the perfect target for a con artist who knows how to exploit your situation to his advantage. It’s common to see price gouging after a large-scale disaster, or contractors inflating their prices because they know you desperately need their services. You could find yourself agreeing to services with incredibly inflated prices, which will be passed on to your insurance company. This hurts everyone, because insurance fraud results in higher premiums.
Occasionally, with a wide-scale disaster, you may also notice neighbors or other people attempting to “cash in” on the event. Perhaps their homes did not sustain damage, or just not as much as they claim. They could be trying to get an insurance payout to cover home renovations that are purely elective, or perhaps they’re claiming “contents” of their home that never existed or were not damaged. If you spot this type of behavior, you have a duty to report your suspicions to the appropriate authorities. Not only are these people driving up premiums for everyone; they’re also slowing down the claims process for those genuinely suffering from a disaster.
Occasionally, con men even take the form of fake insurance salesmen. They urge you to purchase a policy which will cover the damage after the event has occurred. You may be tempted to take one of these offers, because you’re suffering regret over not purchasing enough insurance before the event. Please keep in mind that this is not how insurance works, and you cannot file a claim on any insurance policy if you purchased the policy after the loss has occurred.
If you notice suspicious activity following a disaster, call your local police department and ask to speak with their fraud division.