Insurance fraud often results in an adverse legal situation for the claimant. The cases of insurance fraud have increased significantly in the last five years in the state of Philadelphia. Ideally, every fraud case has its own origin that is derived from the nature of insurance involved. People often provide false information to claim for losses that were not incurred (Farashah and Estelami 2). The provision of such information that is of deceitful nature to the insurer is illegal. The insurer has the ability to charge the insured in court depending on the type of fraud committed. It is ideal that the insurer provides sufficient evidence to level a strong case in court. This paper uses past research and two interviews with an operations manager at McCollum Insurance Agency and a branch manager at Liberty Mutual Insurance in Philadelphia to investigate the prevalence and effect of insurance fraud cases in Philadelphia.
In recent times, Philadelphia has been the subject of numerous insurance fraud cases. According to the interviewees and past research, the cases include individuals who had intended to claim money from an insurance company through the provision of deceitful information. The insurance companies always investigate every claim that is made (Ishida et al. 2). The claims made are validated after insurance investigators find the information provided to truthful in nature. In view of the nature in which the claim was made, some will be substantiated while some will be labeled as fraud depending on the deceitful nature of the information that was provided. Ideally, insurance fraud takes place due to various reasons which might have different consequences (Farashah and Estelami 4). It is not every time that the person making a claim wants to gain money through illegal means and to falsify information. It is possible that the individual was not aware that he or she had made a mistake in the information provided to the insurer. In such cases, the insurance investigators ought to be lenient and take into consideration the circumstances that led to the claim. This would work towards reducing the backlog of insurance cases that are reported in Philadelphia every year.
Bases on the two interviews, the managers noted that one thing to consider when approaching a given insurance court case is the motive of the insurer. The operations manager at McCollum Insurance Agency noted that it is prudent to note that many insurance companies work towards creating a means of making profits off the premium paid. The profits are usually made in high amounts due to the low probability of an individual making a proper claim. However, even when individuals make proper claims to be covered by their insurance, the insurers take it upon themselves to investigate the appropriateness of the claims being made. There is always a search for any type of misconduct on the claimant’s side. Any error made in the insurance contract to the claimant being denied his or her fair share of the claim made. Even so, insurers rarely take into consideration the honest mistakes made by the insured individuals (Farashah and Estelami 5). In view of this, it would be wise to acknowledge that insurance companies have a habit of looking for misconduct or loopholes in the claims made by individuals to deny them exclusive rights to their coverage of loss or damage incurred.
While talking to the branch manager at Liberty Mutual Insurance, he notes that legally, insurers create avenues to lower the amount of the claim that an individual is supposed to get. Insurers take into account every level of mistake conducted by the individual. These mistakes might be laws, regulations, policies and preferred behavior affecting the individual’s coverage. For instance, the insurer can be wary of providing the full amount of the incurred loss or damage to individuals for the following reasons. First, the individual can make the mistake of misquoting the value of the loss or damages incurred by a slight amount. In this instance, the insurer will take this opportunity to discredit the individual of their cover (Ishida et al. 6). Secondly, the insurer may leave out certain details of the insurance cover agreement and thus mislead the consumer in paying premiums that do not cover against loss or damage in an expected manner. In this instance, in the event of loss or damage, the insurer will inform the individual or company of the withheld information and use the occurring legal of policy loopholes to shortchange the claim the individual has made. Thirdly, the individual or company being insured may knowingly or unknowingly withhold or alter a vital piece of information that is party to the insurance cover agreement. In this instance, the insurer will never go to the point of clarifying such information first hand for the purposes of discrediting the claim made by the individual or company in the occurrence of loss or damage.
In view of the information above, insurance companies are not true to what they promise to their consumers. Ideally, the value of any insurance cover is perceived in the ability to be fully covered in case of loss or damage incurred. Furthermore, one vital aspect of insurance covers is the information provided. The insurers should conduct due diligence when an individual provides information at the time of entering into the agreement. This would be a very appropriate behavior to ensure that small errors that might be used to discredit the claim made by an individual will not be present. However, insurance companies have never conducted such activities aimed at proofing the insurance contract agreement. Therefore, individuals end up making claims that are deemed to be unsubstantiated due to the information contained in the agreement or the nature of the claim that has been made (Ishida et al. 16). Therefore, one cannot be very comfortable trusting insurance companies to cover the loss or damage in a complete manner.
The issue of trust is, therefore, an important part of the insurance contract agreement between the insurer and the individual, group or entity being insured. The individual becomes suspicious of the insurer that charges a high premium but delivers a low claim. On the other hand, the insurer becomes suspicious of the claims made by most of the insured individuals. This creates a very unfavorable climate in which the individual or rather the consumer and the insurer interact. Their interaction will never be honest in nature, and thus neither the customer nor the insurance company will be content with the eventual circumstance of their agreement or transactions.
On the same note, companies, groups, individuals or entities seeking to be insured ought to conduct due diligence before paying an insurance premium to an insurance company. Some companies may cheat the consumer to their claim of their paid premium. Therefore, it is also very crucial for the consumer to be careful in reading through the terms and conditions of the insurance premium and be fully aware of what to expect in such and such a situation. Information is key in such circumstances, and thus consumers should be well informed of the nature of the insurance cover agreement.
As the two interviews agree, regardless of all the due diligence that ought to be performed by each of the involved parties, insurance fraud cases have risen in number in Philadelphia. It is prudent to conclude that such cases occur due to the lack of information about the insurance cover transaction. It would be wise to the legal authorities and insurance companies to educate the masses on the various issues that are bound to occur in the interaction between the insurance company and the entity seeking to be covered for loss or damage. By making the public aware of what to do in such a situation and the legal measures to take against insurance companies for unlawful conduct in such transactions. As a consequence, the number of insurance fraud cases would drop to a preferred minimum fostering a culture of honest transaction that leaves every involved party satisfied with the end results.
- Farashah, Ali D, and Hooman Estelami. “The Interplay of External Punishment and Internal Rewards: An Exploratory Study of Insurance Fraud.” Journal of Financial Services Marketing, vol. 19, no. 4, 2014, pp. 253-264.
- Ishida, Chiharu, Woojung Chang, and Steve Taylor. “Moral Intensity, Moral Awareness and Ethical Predispositions: The Case of Insurance Fraud.” Journal of Financial Services Marketing, vol. 21, no. 1, 2016, pp. 4-18.
