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What is insurance fraud?

A white collar crime can be any crime involving lying, stealing or cheating. The Federal Bureau of Investigation coined the term in 1939 and uses it to define crimes of fraud within the government and businesses. Scams in particular are common white collar crimes that you may have encountered before.

A particularly interesting kind of fraud is insurance fraud. It is committed either by an insurance company or by an individual against an insurance company. There are several types of fraud that may take place.

Asset diversion is one of those frauds. This refers to the theft of assets that belong to the insurance company. This kind of fraud is most commonly seen when an acquisition or merger takes place using borrowed funds. Once the merger is completed, the company's assets are used to pay off the borrowed funds for the partner that never had any to begin with, putting them in a position of power within the company through what is essentially a fraudulent buy-in.

Bodily injury fraud is another type you may have heard about in the past. This fraud is committed by personal injury doctors or networks making exaggerated bodily injury claims. The insurance company pays out more than the injury is really worth, costing it money through fraud.

Bodily injury fraud could be combined with accusations of staged auto accident fraud. For instance, if a person stages an auto accident for insurance payments, he may also go as far as to falsify bodily injury information. By doing that, the alleged victim is actually defrauding the insurance company out of money that he or she doesn't actually deserve.

Source: FBI, "White Collar Crime" accessed Feb. 17, 2015

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