Insurance fraud: let the insurers who go after “fraud” first take a closer look at themselves

By Dean I Weitzman, Esq. on February 9th, 2010

Have you seen those ads on television lately where some downtrodden fellow is so desperate that he arranges for his own car to be “stolen” so he can later file a claim for damages and gain a windfall?

The guy ends up getting caught, of course, and is sent to jail.

And the intended message from the huge, scary insurance companies: “insurance fraud is against the law, you will get caught and you will go to prison.”

True enough.

But while the insurance companies that conceive, produce and pay to broadcast these kinds of ads are certainly correct that such incidents of insurance fraud are illegal, immoral and wrong, they’re really just trying to turn the real focus of such frauds away from themselves.

Yes, arranging to have your own car stolen, your own house set on fire or purposely arranging an injury are all cases of insurance fraud, but truly those are small potatoes nowadays.

How is that so?

Because the worst insurance fraud today is what the insurance companies themselves are doing to the typical American family and working person by often and callously denying coverage and claims, delaying payment of claims so that people will take smaller settlements and using other despicable practices that are devastating families across the nation during the worse recession in our recent history.

It’s an outrage.

Filing a claim for medical treatment with an insurance company? Filing a claim for massive storm damage that destroys your property? Were you involved in a serious vehicle accident and suffered from injuries and heavy damage to your vehicle that you still haven’t been compensated for? And you’re still waiting for payment, help and final disposition of your claims?

These are all graphic examples of the institutional frauds being doled out every day by insurance companies that are looking out for their investors at the expense of the people and businesses that they insure — the very people who pay their insurance premiums and expect their insurance companies to help them quickly, fairly and honestly when all hell breaks loose in their lives.

And how do the insurance companies often repay these customers when they file claims?

Often by increasing their rates, cutting their payouts for claims and reducing the coverage limits for their customers.

And what about all the flowery messages about being a good neighbor and standing there with you and being in good hands in an emergency when you need your insurance coverage the most?

Sure, good luck with that.

Today, when more and more Americans have lost their jobs and are on the verge of losing their homes due to a loss of income and significant drops in their credit scores, insurance companies are even taking advantage again by basing their rates on those lower consumer credit scores. It’s adding insult to injury at a time when things couldn’t be worse for families across the nation.

And worse, it’s bad faith.  Here in Pennsylvania, there are laws that protect consumers from bad faith by their insurance companies. So when an insurance company engages in bad faith practices by the three D’s — delay, deny and defend — Pennsylvania law allows insured individuals to sue their insurance companies and to seek punitive damages for the bad faith actions by the companies.

If you are treated badly by an insurance company, when they disregard their duty to fairly treat their policyholders, you should seek legal advice and make educated decisions on how to proceed.

And in the meantime, what would we like to see happen to halt these deceitful practices?

We’d like to see Congress take a closer look at the behavior of the insurance industry and create better protections for consumers so insurance companies can’t arbitrarily deny claims, increase rates and delay claim payments just because they are greedy.
Congress last year took a closer look at credit card companies and how they mistreated their customers and came up with new rules that better protect consumers and their credit card transactions.

It can be done for the insurance industry as well.

It’s time for reforms that look out for consumers and stop the frauds being perpetrated on them every day by insurance companies.