How does insurance fraud impact consumers?

Insurance fraud significantly impacts consumers primarily through its contribution to higher premiums. When fraudulent claims are made, insurance companies incur additional costs in payouts that exceed what they would otherwise pay for legitimate claims. To counteract these increased costs, insurers often adjust their pricing strategies, ultimately resulting in higher premiums for all policyholders. This financial burden is passed down to consumers, as insurers need to maintain their profit margins.

Moreover, the overall perception of risk in the market changes due to higher instances of fraud, which can lead to stricter underwriting practices and reduced coverage options. Therefore, consumers not only face higher costs but may also encounter challenges in finding affordable coverage, as insurance companies adapt to the increased threat of fraud by altering their pricing and policies.