Originally Posted by
Flyingwasabi
But the discussion is on, how would AMEX know. Or how will Amex differentiate one really accidental drops his phone into the lake, or one just prefer to go through purchase protection rather than return protection. Because the current rules and limits (300 vs 10,000) does somehow give people incentives to do so.
*How* do they know? That's for them to keep a trade secret. But insurance companies have entire departments that investigate suspected fraud, and the same people who write algorithms that so accurately detect fraudulent transactions, also write algorithms to flag claims. Also, a claims adjuster is going to review your records as part of the claims process and might find your claim fails the 'sniff test'.
It's perjury to file a fraudulent claim, and that's enough for most people to overcome the "incentives" you allude to.