The Fraud
My car somehow caught fire and was a total loss. Did I mention that my priceless violin was in the back seat? Oh well, I'm insured for contents.
Joe made a big sale in the middle of the month and his inventory was reduced to almost nothing. But then there was that huge fire, and somehow those goods that were sold never got taken off the inventory records before the insurance claim was made.
Popeye sends his insurance guy a copy of the paperwork for a boat and buys substantial coverage for it. Sadly, he soon reports the vessel sank in quite deep water during a fishing trip.
A major hotel receives notice of a lawsuit from a person who claims to have slipped on water carelessly left on the lobby floor, causing her to fall and injure her back.
The Flaw
Violin and inventory ashes don't make for good evidence of fraud. How can an insurance firm prove these items never existed?
A bill of sale and title to a boat won't float. How can an insurance firm prove the boat never existed when it allegedly sank in deep water?
Un-witnessed slip and fall claims almost always end in a settlement. The cost of contesting the litigation is too high.
The Fix
For expensive items, insurance firms should demand to see and touch the goods they're insuring, but this is often impractical. Unfortunately these frauds are, like so many others, counted as a cost of doing business, and the public pays higher premiums to cover the false claims.