Insurance comprises a very large portion of any modern financial market, and insurance fraud is one of the biggest scams that people try to perpetrate on a daily basis. To put it simply, insurance fraud is any act that is committed with the intent of obtaining money from an insurance company fraudulently. There are many different types of scams and frauds that take place, and insurance companies have many ways of determining who is committing fraud and taking actions to stop the fraud.
The single most common type of insurance fraud is false claims. A false claim is when somebody files a claim when nothing has actually occurred, or the damage was fraudulently committed. Auto insurance has the highest rate of false claims because they are relatively easy to commit. For example, somebody may damage their own vehicle by hitting a tree, and then claiming they accidentally drove off the road. The aim of this is to get a payout from the insurance company and then never fix the car. Another example of insurance fraud would be taking a life insurance policy out on somebody and then setting up a plot to kill the person or otherwise eliminate them.
Insurance fraud is always caused by one motive: financial gain. There are a variety of methods that scammers use to try to beat the system. The most common method is inflating the loss that someone has incurred when an actual accident has happened. Losses due to insurance fraud account for billions of dollars in losses each year. In the United States alone, over $80 billion dollars is lost each year due to insurance fraud. There are many laws that can convict people from insurance fraud and there are thousands of civil suits filed each year in relation to insurance fraud.