The concept of insurance came about after a creative entrepreneurrealized that he could assure his clients of a future free ofunprecedented calamities but at a certain fee. However, as years wentby, clients and insurance companies devised ways of ripping eachother off. In legal terms, insurance fraud is an act aimed atobtaining a fraudulent outcome from an insurance process.
Clients can make false claims in order to get underservedcompensation while insurance companies may deny a genuine claim justso that they can increase their profit margin. The primary motivebehind insurance fraud is greed for more money. Insurance fraudaffects all including third parties hence the reason every partyshould care. These cases are universal, and China is not anexception. Insurance fraud is deleterious to the society andeverybody should play his or her part to prevent it.
Insurance fraud could take many forms with the most common beingapplication fraud. This type of fraud involves falsifying personalinformation when applying for an insurance policy. Many people lie orfail to disclose vital information, which will make them pay morepremiums. The most common type of insurance fraud on the part ofinsurance companies is the use of rogue agents who fail to give allthe necessary information when prospecting for new clients.
Some of the agents will go to the extent of lying to the clientsabout the types of claims that the insurer will be willing to pay.This happens in case the risk insured against happens. Other types ofinsurance fraud include motor insurance fraud such as contrivedaccidents. This involves claiming compensation for damages that didnot occur in a road collision.
Why should we care?
Members of the society should care about insurance fraud because itaffects them either directly or indirectly. Through insurance fraud,insurance companies have been compelled to increase premiums in orderto carter for the profits lost through fraudulent claims. Accordingto Pieters (3), insurance companies suffer millions of dollarsthrough fraudulent claims.
As it is usual with any business in a capitalist setting, the extracost of operation is passed on to the consumer. The number of peoplewho have suffered because of these fraudulent claims is immense, andthe implications are largely financial. The fraudsters have madepremiums to be high even for basic insurance such as health andeducation. It is therefore upon the people to be worried about thevice because it affects those who are involved and those who are not.
Due to the rising number of cases of insurance fraud, companies havebeen skeptical in dealing with all claims-whether genuine or staged-hence the reason for delayed insurance settlements. For instance, itis now common in China for insurance companies to investigate anaccident before compensating the affected party. The company willhire the services of a specialist who will then check for anydiscrepancies in the motor accident report.
The process could sometimes take a week before the insurance companyarrives at the decision to compensate the policyholder. The issue ofdelayed settlements has been a source of great inconvenience for manygenuine claimants. The issue is worse when it is an emergency such asmedical payments for an injury due to an accident.
Insurance fraud could also be a direct danger to the society. Someclients make false claims by using ways like staging a car accidentand starting a fire intentionally. These staged catastrophes could goeither way and harm innocent civilians in the process. Ahead-on-collision staged between clients with the aim of causinglimited damage to their car bumpers could end up in a tragic accidentthat entangles pedestrians and other motorists. Intentionally settingone’s house on fire could spread the fire to a neighbor’s houseand lead to injury or loss of life. By the fact that these stagedaccidents are not performed by professionals, everybody in thesociety should care enough to put an end to this vice.
According to Hewitt (3), three doctors and a villager named Yang inEastern China’s Anhui Province were involved in a ratherdistasteful insurance fraud. The three doctors would inform Yang ofany deaths that had occurred to their cancer patients at the countyhospital. Yang would then assemble his nephews who would then stage afatal car accident on the recently deceased bodies using Yang’scar.
When the bodies arrived at the hospital, two other doctors who werepart of the fraud would pronounce the victims and indicate that thecause of death was a tragic road accident. After the staged accident,Yang and his wife would go to their insurance companies to makeclaims for the accident. In a span of four years, the Yangs and theirdoctor friends had made 1.6 million Yuan in insurance claims.
In 2007, an old woman in the Eastern City of Nanjing fell at a busstop. A young man took her to the hospital because he feltempathetic. While in hospital, the old woman accused the young man ofpushing him at the bus stop hence the reason she fell down (insurancefraud news 3). The woman, who was found to have multiple fracturesfrom a previous accident, was demanding that the young man’sinsurance caters for her medical bills because her own insurancepolicy could not. What had started as a case of a Good Samaritan endsup putting the young man in the scrutiny of the public eye. The caseinvited police investigations and a date with the corridors ofjustice.
The third case involves a series of hospitals and medicalpractitioners in the City of Lipanshui. Insurers discovered thatdoctors engaged in numerous malpractices such as overprescribingdrugs and requesting for unnecessary tests (Chang 4). Hospitals alsoforged records to show that in-patients spent more days at the wardthan they actually did. All these practices were aimed at increasingthe compensation made towards hospitals and doctors in healthinsurance payouts. The report incriminated 107 out of the 130 medicalcenters in the city. The investigation also revealed that some of thepractices, such as overprescribing medication, were harmful to thepatients.
Consequences of the fraud Cases
The case involving the Yangs and their relatives led to the arrestof seven people by Chinese authorities. Previously, the insurancecompanies of which the Yangs were policy holders were curious of thetrend in Yang’s insurance claims because all the victims of thetragic accidents had been diagnosed with cancer earlier on.
However, the real loophole in the swindle emerged when investigatorsfound out that one of the victims of the staged car accident had beenrecorded dead due to cancer, a day before the accident. All theperpetrators were sentenced to 10 years in prison.
In the case regarding the Good Samaritan and the old woman, thecourts forced the young man’s insurance to carter for 40% of thewoman’s medical bills. The decision by the court caused a lot ofpublic outcry because many people felt that the old woman should havebeen jailed for making a false claim regarding the source of herfractures. Experts criticized the decision saying that the judge wasbiased because he felt empathy towards thee old woman. Under normalcircumstances, the old woman would have served a prison sentence ofnot less than 10 years.
In the third fraud case, no legal procedures have been institutedyet on the medical centers that have been defrauding health insurancecompanies. Despite the fact that report was generated a few yearsago, the authorities are yet to make any arrests. Part of the reasonfor the inaction is because insurance companies lack the services ofexperts to validate the claims made the medical centers in the city.
Role of individuals in preventing insurance fraud
Since insurance fraud affects all, it is the role of individual toreport any cases of the vice to the relevant authorities. Severalinsurance regulatory bodies have set up hotlines where resident canmake anonymous tips when they suspect cases of insurance fraud. It istherefore upon the individual to be a good citizen and report anycases of insurance fraud that they witness.
Some of the perpetrators of such injustices are close friends andrelatives who ought to be stopped because their activities harm manyinnocent policyholders. Individuals should also be ready to givetheir testimonies in court once the instigators of insurance fraudhave been arrested and presented in court.
It will also help if disgruntled clients reported any insurancemalpractices to the insurance regulatory authorities of theirrespective countries. In as much as the clients are responsible forthe bigger portion of insurance fraud, insurers are not innocenteither. It is therefore the role of every responsible citizen toreport when they feel that the insurer has refused to pay a genuineclaim. Reporting such cases will deter insurers from swindling moreclients in future. It will also bring the unprofessional acts to thelimelight and therefore create more awareness amongst the citizenry.
Insurance fraud involves an action that seeks to obtain a fraudulentoutcome from an insurance process. Both insurers and clients havebeen indicted in insurance fraud. Among the most common forms ofinsurance fraud, include car insurance. Everybody should care aboutinsurance fraud because contrary to common perception, the viceaffects everybody in the society. The most prevalent effect is theincrease in the rate of premiums in order to cater for losses due tofraud. Other effects could be injury and loss of property to thirdparties when staging accidents in order to collect insurance claims.Some of the most conspicuous cases of insurance fraud in Chinainclude a syndicate of seven, which was arrested for using the bodiesof cancer victims to stage a fatal car accident. The deleteriouseffects of insurance on the society call upon every member to reportany cases of insurance fraud committed by clients and insurancecompanies.
Chang, Yun. High levels of medical insurance fraud found in ruralareas of southern Chinese province. South China morning post,August 2015. Web<http://www.scmp.com/news/china/policies-politics/article/1850183/high-levels-medical-insurance-fraud-found-rural-areas>September 14, 2016.
Hewitt Duncan. China Arrests 7 For Faking Car Crashes To Claim LifeInsurance For Dead Cancer Patients. International business times,May 2015. Web<http://www.ibtimes.com/china-arrests-7-faking-car-crashes-claim-life-insurance-dead-cancer-patients-1930665>September 14, 2016.
Insurance fraud news. `Good Samaritan` scam: It`s now covered inChina. insurancefraud.org, 2016, Web<http://www.insurancefraud.org/IFNS-detail.htm?key=21226>September 14, 2016.
Pieters Janene. Insurance fraud leads to higher premiums. NetherlandsTimes, May 2016. Web<http://www.nltimes.nl/2016/05/12/insurance-fraud-lead-higher-premiums/>September 14, 2016.