Insurance fraud often involves one person or a small group of co-conspirators seeking to make inappropriate claims and deprive insurance providers of resources. Insurance companies that uncover questionable claims, sometimes long after paying them, and regulatory agencies can take legal action against policyholders and claimants that make fraudulent insurance claims.
Not all insurance misconduct is the fault of an individual policyholder or a service provider filing a claim. There are professionals who build entire businesses around questionable insurance claim practices.
Insurance fraud in action: A case study
In a recent unprecedented case, the Louisiana Department of Insurance issued a cease-and-desist notice to a law firm that specializes in insurance claims. The state has also asked individuals who believe they may have unwittingly played a role in this fraud to come forward.
The law firm subject to the cease-and-desist notice issued by the Louisiana Department of Insurance allegedly submitted information to different insurance companies claiming that property owners had retained their services for a hurricane insurance claim.
The allegations against the firm include sending letters on behalf of individuals who had no relationship with the firm and trying to secure money from insurance providers accordingly. Court records show there have been no less than 856 such misrepresentations by the firm, at least 11 of which resulted in settled claims and one of which involved a lawsuit.
The people allegedly represented by the firm were often not even aware of the questionable claims. This specific case is only one scenario in an increasing trend of inappropriate hurricane claims following large storms in the state. Overwhelmed insurance providers may struggle to properly handle claims as quickly as is necessary when the volume increases due to extreme weather, which puts them at risk of fraud from bad actors.
Insurance companies may need help defending against fraud
Fraudulent claims cost insurance companies – and ultimately policyholders – millions of dollars. They undermine the good faith relationship that is necessary for insurance systems to operate. Providers who believe that an individual, a business or even a law firm has engaged in misconduct related to a claim can fight back and defend themselves. Responding properly to questionable insurance claims is key to protecting the solvency of organizations that insure others.