Insurance is a quite easy target of scams. Many insurance company become fraud victims with total amount up to billions dollars per year. With this condition, they make a preventive step by increasing premiums to cover "fraud cost". Increasing premium is not ultimate solution to prevent scams. Therefore, they have fraud detection departments which is in charge for preventing fraud and calculate money paid out for false claims. False claim and excessive risk which is not proportional with premiums are categories of insurance fraud. Both categories could make the insurance company collapse, however the excessive risk is the most dangerous for insurance company. If clients give false information when applying for an insurance, they will pay premium less than they have to pay. When they file claims, insurance company have to pay higher than they should be. Insurance companies have many ways to prevent fraud and collect data accurately.

Surveillance

In health insurance or disability insurance case, the insurance company can monitor their clients directly. When the client file a claim, they have to fill form, this form record the document about their activity after the illness or accident. Insurance company may install surveillance camera video, review the claims from it and compare with the client's form. If the clients falsify the illness or disability, the payouts will be stopped. 

Whistle Blowers

Insurance company can gather information from third parties. They usually provide the whistle-blowers number for anonymous calls. Whistle blowers are legal and protected by law. Individuals can call hotline numbers to report what they know about the potential insurance scams. Not only insurance, whistle blowers are commonly used in any areas. Government and general business use whistle blower to get information from society about certain issues. 

Claims History

The clients' claim history is one of useful tool for insurance company to examine potential fraud. Insurance company will terminate coverage contract if clients' surpass a certain number of claims. This step is taken to protect insurance company from huge losses. 

Investigating

Generally, insurance companies have insurance investigators to review and analyze any claims that seems particularly high. They will inspect the situation to gather more evidence in claims investigation.

Giving false information when file claims seems tempting, but fraud is a crime. Getting thousand dollars from insurance fraud are not worth with the consequences you can get. Giving false data when applying for an insurance is also a fraud and you might get penalty as well.