Types of Insurance Fraud: Hard Fraud vs. Soft Fraud 

Insurance fraud is a scenario in which the insurance company, agent, or insured defrauds another party to gain claim or advantage that the party is not otherwise entitled to get. As there are types of insurance, there are also many types of insurance fraud. Moreover, the impacts of each type of fraud is different.  

The two classifications of insurance fraud are hard fraud and soft fraud.  There is an ongoing confusion as to which fraud is more dangerous and which needs more attention. Here are few major differences between hard fraud and soft fraud. 

Hard fraud is the kind of insurance fraud where a person deliberately creates a false scenario to collect an insurance settlement. This is purely fake claim.  

Soft fraud is when you exaggerate an actual loss to generate extra money through claims. Soft fraud is more prevalent in the industry and is more dangerous.   

Soft frauds are considered to be more dangerous because it is difficult to investigate these frauds. These scenarios have happened, and it is difficult to quantify the loss. Hence, cross-verification is tough, and fraud is easier.   

In all the types of insurance fraud, hard fraud is the easiest to detect. Hard fraud is easy to identify can be said because cross-verification of a deliberately created scenario is easier.   

Insurance companies need to be more aware of soft frauds because soft frauds are under-rated. Insurance agents and companies can face losses in the form of inflated claims. While studying the different kinds of frauds in insurance, insurance agents need to know how to draw a difference between hard fraud and soft fraud.   

Both hard fraud and soft fraud are dangerous, but the ways of dealing with them are different. The proper valuation of risks can prevent soft fraud at the time of the purchase of the policy. We can control hard scams by being more cautious while processing claims.   

All types of insurance fraud can be stopped and prevented with care and caution.