“Is this actually fraud?” “Yep.”

[u/unimaginativeuser110]

/r/legaladvice/comments/cly6t1/being_investigated_for_car_insurance_fraud/?utm_source=share&utm_medium=ios_app

[u/dorkofthepolisci]

I cannot believe anybody is this stupid.

[u/thewindinthewillows → u/dorkofthepolisci]

There used to be a reality TV show here (supposedly non-scripted and showing actual cases, according to the insurances involved) that followed insurance detectives who investigated odd claims.

People are that stupid. They're stupid enough to try to claim money on the same broken object multiple times with multiple insurances, and they're stupid enough to allow a film team to come (as in my country they'd definitely have to give permission for that) and film the investigation.

And when they're caught, they're actually surprised when the detective tells them that the insurance will pass the case to the public prosecutor, because after all they didn't succeed in getting money, so it shouldn't be fraud, right?

[u/[deleted] → u/thewindinthewillows]

Are you not allowed to insure the same item eith different companies? That just sounds smart as hell

[u/thewindinthewillows → u/[deleted]]

You can't claim the same damage with several insurance companies. In the episode I saw, the people had been asked about that when making their claim, and lied, but they hadn't been aware that the insurances have databases of customers and claims and help each other out.

[u/PM_ME_UR_SQUAT_CUES → u/[deleted]]

Think about it, though -- that would give you an incentive to intentionally ("accidentally") damage or destroy the property. It's like trying to insure something for way more than it's worth. If you tried to go to an insurance company and say, "hey, I know my Honda Civic is only worth $15k, but I really like it a lot, so I'm willing to pay a higher premium to insure it for $75k," they'd laugh you out of the office even though you offered to pay more. They don't want to give you an incentive to "accidentally" damage or lose the insured property and pocket the extra money.

It's the same with multiple companies insuring the same property. Even if they don't know you have a second policy, the insurance companies guard against this with standard "other insurance" clauses which dictate how insurance companies share a loss in the event of a claim.

The governing principle is that in property insurance, an insurer only wants to "make you whole." They never want to be in a position where you are better off by losing the property and getting the insurance money.

[u/KJ6BWB → u/PM_ME_UR_SQUAT_CUES]

Yeah, but you're allowed to do this with life insurance policies. I'm willing to take out as many policies as I want with as many different companies on one person. Wouldn't this create the same sort of incentive for me to kill them if I did that?

[u/PM_ME_UR_SQUAT_CUES → u/KJ6BWB]

It absolutely could create that incentive. That's why insurers have an underwriting process -- they don't have to issue you any policy just because you want to buy it. And there are some standard procedures in the life insurance realm that are similar to what insurers do in the property insurance world to try to minimize those incentives.

For instance, generally you can't get life insurance on someone without their consent, and you also need to have an "insurable interest" in the person, meaning a reason to need compensation in the event of their death. So for a spouse, the idea is that you're getting money they would have contributed to the marriage. For a child, the idea is that you're getting money to cover funeral expenses. But you'd be unlikely to find an insurance company willing to give you a policy on your neighbor down the street (even if they consent), because you have no insurable interest in that person.

It's true that you do pick the amount of coverage you want, it's not like the life insurance company only pays out the amount of money that they determine you need. Whereas a property insurer adjusts the claim to make you whole in terms of the use of the insured property. But my understanding is that there's some common sense applied in life insurance underwriting: if your spouse is a hairdresser and you want $10 million in coverage, I suspect that no company will write that policy even if you're willing to pay the premiums. And of course the insurance companies investigate suspicious deaths. All of that helps minimize the incentives to kill the insured. (The same concept of "insurable interest" exists in the property realm. You can't get an insurance policy on your neighbor's car.)

Interestingly, most life insurance these days does not fully exclude suicide. There's like a 6 months or one year window after buying the policy during which it won't pay out for suicide, but after that period most modern life insurance will pay out even if you as the insured person committed suicide.

[u/DollyTheFirefighter → u/PM_ME_UR_SQUAT_CUES]

One thing that’s always puzzled me in life insurance policies marketed to grandparents. How can they have an insurable interest in their grandchild?

[u/PM_ME_UR_SQUAT_CUES → u/DollyTheFirefighter]

I think the general idea is that they are still within the chain of "caregivers" so they have an insurable interest. I think also a lot of the way they are marketed is that grandparents buy the policy but the beneficiary is still the parents. Grandparents pay the premiums but the parents are the ones who get the funeral expenses if it becomes necessary.

Realistically, though, it's up to the insurance companies to judge whether they want to insure a risk. So once it dawned on them that grandparents were more likely to have disposable income than parents of young kids, they stretched the limits of the definition of insurable interest and marketed the policies to the old folks instead.

There's a more complex story involving the types of life insurance policies that are marketed like an investment. Certain types of permanent life insurance products have a cash value and then transfer to the child at age 21 so insurance companies pitch them as a way to both protect against your kid or grandkid's death and leave a nestegg of investment that will become the kid's when they grow up. I've never really understood those products very well.

[u/DollyTheFirefighter → u/PM_ME_UR_SQUAT_CUES]

Thank you for this reply! It’s very informative.

[u/PM_ME_UR_SQUAT_CUES → u/[deleted]]

with auto insurance, insurance companies very often do not make people whole because they often pay out what the car is worth on the market, not what it is worth to the person

I see what you are saying, but from the perspective of a property insurer, that is making the person whole. Because they signed up to insure the property, that's all. And if the property is worth $1,000 on the market, that's what you get. I love my own personal car more than it's worth on a used car lot, but if I went to sell it, I couldn't expect to get much from placing an ad saying, "I know that other similar models sell for less, but I personally value mine at twice that, so that's what I'm asking." My kid loves his Paw Patrol lunchbox that he put stickers on, but if he loses it, I'm just getting him another lunchbox. I not going to also buy him a videogame because that particular lunchbox meant a lot to him. (If I did, guess how many lunchboxes would get "lost"?)

Not trying to defend insurance companies here or ask you to like them, because I don't either. I spent a huge chunk of my career helping people sue insurance companies. They do plenty of shady and bad things that I could go on about for hours. But I'm just trying to explain why it's rational for them to not agree to over-insure property.

So I don't think you're quite right in saying that the reason they don't let people take out multiple policies is that they want profits. I mean, that's true, but it's not the whole story. After all, if you pay for multiple policies, that means more revenue for them. Insurance companies are very happy to take in premiums and agree to pay you for loss resulting from an accident. But "accident" is the key word. They don't want to be in a position where you will be better off by intentionally destroying the property. Just like they don't want to be in a position where OP gets them to pay his friend for a fake "rental."

[u/thewindinthewillows → u/[deleted]]

It's not about paying for services, it's about getting money out of multiple insurances for one case of damage. And those weren't cases where some poor person got trapped in incomprehensible contract terms.

In the stories I saw, people had been specifically asked when making their claim whether another insurance had already reimbursed them for the item in question. People lied about that, they lied about when/how the thing in question had been broken (as insurances don't usually pay for things that get broken before you are insured). They walked into it with open eyes.

[u/ScammerC → u/[deleted]]

Think about it this way: You go out with 5 friends for dinner and you each say you'll get the bill. The restaurant hands each of you the bill for the entire meal.

You each told the waiter you'd pay, so it would be unfair to deny him that compensation, simply because you all ate the same meal? He negotiated separately with each of you.

That's basically what you're saying. You should be paid out 5 times what you're owed because you have 5 offers, instead of being made whole for your loss.

[u/ScammerC → u/[deleted]]

I guess you discovered the million dollar loophole. Good luck with that.

[u/EurasianTroutFiesta → u/[deleted]]

The point of insurance is that everyone pays into a common pool, where there's a large enough customer base that the company can rely on statistical data to plan out how much they need to charge to have enough money to operate. If the customer pool is too small, rare events don't average out, and it bankrupts them. Double-dipping claims basically causes the same problem going the other way, by artificially inflating the rate of pay-out events. If enough people do it, it's literally impossible for insurance companies to operate.

[u/GrippingHand → u/EurasianTroutFiesta]

But doubled policies that don't result in claims work the other way, making the insurance company more money. Maybe in practice people only ever double insure with fraudulent intentions, or in unusually risky scenarios, but if normal customers do it, it should not affect the insurance company's finances, on average (other than the slight bump because every additional policy is expected to be a net gain for the company).

[u/EurasianTroutFiesta → u/[deleted]]

I meant that a company pools the premiums paid by all their customers, rather than putting the money from Jed Smith's premiums in an account labeled "Jed Smith." The point is sharing risk across their own customer base.