BUISENESS MANAGEMENT
INSURANCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Fees paid by individuals charged with insurance fraud are used to reduce all customers’ premiums
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The cost of large, false payouts are passed onto all customers through higher premiums
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High levels of fraud result in fewer insurance claims overall
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The federal government reimburses insurance companies for fraud cases, so all Americans are paying these claims through their federal taxes
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Detailed explanation-1: -Fraud not only inflicts extra costs on insurance companies, but it also financially impacts consumers and businesses. The Coalition Against Insurance Fraud indicates that fraud costs businesses and consumers $308.6 billion a year.
Detailed explanation-2: -Fraud goes against all the basic principles of insurance such as insurable interest, utmost good faith, proximate cause and indemnity. Therefore, Fraud will hit back at the customers with unaffordability of premiums and consequently affect their protection levels.
Detailed explanation-3: -IRDAI’s circular bearing IRDAI/SDD/MISC/CIR/009/01/2013 describes fraud in insurance as an act or omission intended to gain dishonest or unlawful advantage for a party committing the fraud or for other related parties. This may, for example, be achieved by means of: misappropriating assets.
Detailed explanation-4: -Some insurance lines are more vulnerable to fraud than others. Healthcare, workers’ compensation, and auto are generally considered the most affected insurance sectors.