A False Application to Get a Lower Premium or to Make a False Claim is Always Fraud

A Video that Explains that This Isn't Fraud I Just Need to Save Money

Insurance fraud is not limited to fake claims. Most people don’t present claims. The basic principle upon which insurance is based require the many to pay small amounts so that the few can collect. If the risk is not spread fairly among the many, all suffer.

Most businessmen would be shocked at a suggestion that they inflate a claim. They are honest in their business dealings. They honor their contracts and pay their bills. They seldom have insurance claims. When they have a claim, they deal fairly and honorably with their insurer.

Paying insurance premiums hurt. The marketplace is competitive. Prices vary from insurer to insurer. Skills vary from insurance broker to insurance broker.

Eventually, businessmen learn how insurers set their premiums. They know that rates are applied to modifiers like the square footage of the structure, the payroll, or the gross receipts of the business.

A businessman, sitting with his insurance broker, asks how he can get the lowest premium. He will often put his morality on hold when the broker suggests that he estimate a lower amount of gross earnings. The businessman will see nothing wrong with loping 10,000 square feet of his 50,000-square foot warehouse when applying for insurance. When called upon to list the payroll for his workers’ compensation policy, he will be unconcerned when he tells his broker the payroll is $200,000 less than it actually is. It is just good business sense to reduce your workers’ compensation premium. When his policy shows factory workers cost more to insure than clerical, he “accidentally” reports to his workers’ compensation insurer that ten percent of his employees are factory workers and ninety percent are clerical, although the opposite is true.

The Golden Tooth

A broken tooth is a tragedy to most people. To the waitress a broken tooth was the beginning of a career.

For fifteen years she waited tables in restaurants varying from small coffee shops to exclusive French restaurants. She saw, almost weekly, at least one customer trying to avoid paying for a meal. They would find flies in their soup or chunks of metal in their hamburger. Sometimes it was the fault of the restaurant and sometimes it was blatant fraud. Some people actually suffered injury because of inadequacies in the kitchen.

The Fraud Division, noting that she was claiming only $650 concluded that the claim was too small to warrant the expenditure of investigative time. No one would investigate further, or prosecute, the waitress.

Rather than take further chances, she moved to another city where she continued in her new profession. She is probably having a fine meal in your town tonight.

© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and [email protected]. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/  The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4