Insurance claims in Australia total over 14 billion dollars in benefits paid to citizens every year. Of that figure, roughly 1.4 billion is estimated to be paid for exaggerated or fabricated claims made by policy owners. While motor vehicle insurance fraud occurs most frequently, fraudulent home and insurance contents claims rank as the third most common type of insurance fraud. Although some consider insurance fraud to be a "victimless" crime, fraudulent activity directly contributes to higher insurance premiums paid by honest policy holders and can negatively affect the process of truthful claims. The truth is that insurance fraud hurts everyone by increasing the risks involved for insuring property and thereby increasing the overall costs for insurance.

What constitutes insurance fraud?
Regardless of the claim amount, insurance fraud is an illegal activity. Little white lies on insurance claims are just as criminal as major insurance frauds. There are several different ways in which insurance fraud can be perpetrated:

• Exaggerating the damages suffered in a legitimate claim
• Knowingly filing a false claim
• Withholding information or changing the facts related to the claim for the purpose of bypassing policy exclusions or restrictions

While all types of insurance fraud are damaging, the most common form (exaggerating damages on a legitimate claim) is also the most alarming. Many people who would consider themselves law abiding citizens see nothing wrong with filing an exaggerated claim to increase their benefits. In actuality, filing a false or exaggerated claim to receive additional compensation is comparable to embezzlement or any other fraudulent appropriation of funds.

Insurance companies' reaction to fraud
The increasing acceptability and cost of insurance fraud has led insurance companies to seek new strategies and develop new technologies to help them identify fraudulent claims. Analytic software, claim auditing and profiling techniques combined with the employment of police trained consultants are all steps being taken by insurance companies in combating the threat of insurance fraud. Additional tools in the war on insurance fraud include:

• Insurance Reference Services database - A centralized database maintained by member insurance companies that allows the cross-referencing of potentially fraudulent claims against similar claims filed with other insurance agencies. The IRS database can provide individual claimant histories and also credit or other related information that may not have been disclosed by the claimant. Furthermore, many insurance companies are now screening policy applicants through the database prior to issuing a policy to minimize the risk of fraudulent activity
• Reward incentives - The implementation of a reward system by the Insurance Council of Australia provides up to a $25,000 reward for the reporting or fraudulent claims that lead to the arrest and conviction of the perpetrator. Citizens who may have turned a blind eye to insurance fraud without self gain are considered much more likely to step forward under the new system

In order to provide the best and most timely service for legitimate claim reimbursement, it is clear that insurance companies and policy holders need to work together to stop insurance fraud. Insurance fraud is a criminal activity that takes money out of the pocket of every insurance owner in Australia.