As the whole purpose of insurance is the indemnification of those who have suffered an insured loss, the largest disbursement of an insurance company is claims payouts. To manage this payout effectively, insurers focus extensively on the balance between paying those who legitimately deserve a claim payment and not paying those who do not qualify.
It is part of human nature that some people will wish to be paid more in a claims payment than they really qualify for. These payments may seem small, incidental, mundane in cases where a legitimate loss is "padded" by increasing the value of a lost object, or increasing the number of objects lost, or extending by a day or two a period off work due to an insured injury. These little extras become sizable in the aggregate.
Some with otherwise normal lives have been known to run into financial problems or experience high stress for whatever reasons. Occasionally these are driven to the point that they cause a loss in order to get the insurance payment, whether it is through arson of a building or vehicle, sale of an object which is then reported as stolen, or some other illegal strategy.
There are also those who make a living from criminal activities, whether individual or organized. These lead to such activities as staged accidents.
All of these, from small individual to large organized activites are examples of insurance fraud, which others who pay insurance premiums end up paying for.
In order to reduce payments which are fraudulent, insurers use many techniques and resources. Firms which specialize in insurance fraud investigations, through techniques including surveillance, are among those resources.
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