Hamm: Insurance Department working hard to battle increase in fraudulent claims
Posted on 12/30/2010
BISMARCK, N.D.-Imagine purchasing a life insurance policy for your young son, faking his death and then submitting a claim for the insurance money. While this doesn't sound like something that would happen in North Dakota, this very situation played out in Fargo in 2010. Thanks to an Insurance Department investigation, the fraudulent life insurance claim was never paid.
North Dakota Insurance Commissioner Adam Hamm today encouraged consumers to learn more about insurance fraud and how it affects them.
"Insurance fraud increases the yearly cost of premiums by about $300 for the average household," Hamm said. "When a company pays a fraudulent claim, we are all paying for it."
In January 2010, a Fargo man purchased a $50,000 term life insurance policy on his eight-year-old son. Six months later, he allegedly filed a claim with his insurer that his son had died of malaria while visiting family in Kenya. He allegedly produced a Kenyan death certificate and handwritten medical records supporting his claim. An Insurance Department investigation revealed that the man's son was still alive.
"Fraud comes in many forms, including staged auto accidents, inflated damage claims and phony thefts," Hamm said.
From 2001 to 2006, only four fraud cases were reported to the Department. In 2007, that number jumped to 16. By 2009, that number more than tripled to 50. As of Dec. 27, 2010, there have been 62 fraud cases reported to the Department. The amount of loss due to fraud in North Dakota was $188,047 in 2009; that amount increased to $1.54 million in 2010 as of Dec. 27. Due to the increase in fraudulent claims, the Department hired a dedicated fraud investigator in 2009.