There are many reasons why insurance premiums may be high. One of them is insurance fraud.
“Americans don’t realize that insurance fraud losses are reflected in higher premiums. If you think insurance fraud is not a big deal, consider the $14 million on the table that one major U.S. insurance company is attempting to recover from 111 defendants. That same insurance company has just launched its fourth major insurance fraud lawsuit for 2012, and the amount they want to recover is staggering,” explained Michael Smith, an Arkansas injury lawyer and Arkansas accident lawyer, practicing personal injury law in Arkansas.
Recovering money in a fraud situation, means filing a lawsuit under the Racketeer Influenced and Corrupt Organizations Act (RICO), in which defendants are alleged to have taken part in various schemes and cons, to submit false and misleading invoices for items such as orthotic devices, medical equipment and supplies. Since 2003, this insurance company has filed 40 fraud lawsuits seeking to recover over $217 million.
“It could well be viewed as an epidemic of greed on the part of those fleecing the insurance company. In retrospect, those who attempt to pull off this kind of scam should know there is an enormous risk of getting caught, and the consequences are not worth it,” Smith said. What this means for others, who submit legitimate claims and pay their premiums on time, is that they are paying out extra money to cover fraudulent claims. “Call it a fraud tax if you will,” he added.
Part of the problem, in some states where insurance fraud is rampant, is the state has a no-fault law, which companies and individuals find easy to exploit in a grab for more money.”The interesting thing is this; the lawsuits were not launched until relatively recently, which means it took the company some time to figure out where the losses were occurring. Fraudsters can be smooth and quite inventive in their quest to get rich quick on the back of insurance companies. However, justice does catch up with them eventually,” Smith observed.
Will the recovery of the lost millions result in lower premiums over time? “Good question and you would like to think that would happen. However, that may not be the case. Operating at a deficit for a period of time tends to strain company resources. Even recovery of the money may not completely cover the long-term losses, but instead, may put the company back on track,” he remarked.
“For those thinking about ripping off an insurance company, be aware that your actions will be detected. Are the ill-gotten gains of crime worth risking your reputation and that of your company? That depends on how much time you want to spend in jail,” Smith observed.
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Michael Smith is an Arkansas injury lawyer and Arkansas accident lawyer, practicing personal injury law in Arkansas. Learn more by visiting