Insurance fraud happens when someone deceives or defrauds an insurance company in order to collect money. This type of fraud is a crime in all fifty states, and the majority of the states have created fraud bureaus to identify and investigate fraud incidents. Fraudulent claims can be either a felony or a misdemeanor depending on the nature of the fraud committed. In general, nearly any fraud that involves an insurance company can be considered insurance fraud. Common insurance fraud activities include:
- Exaggerated estimates of damage
- Under-reporting important information
- Making false claims.
By some estimates, insurance fraud costs the insurance industry upwards of $80 billion a year, which is then inevitably passed on to consumers. Thus, it is in the best interest of both the insurance companies and individuals who need insurance of any kind to be aware of insurance fraud.
What Are the Elements of Insurance Fraud?
In order for the prosecutor to be able to convict the defendant of insurance fraud, the following elements must be met:
- Defendant knowingly made a false statement
- The statement is made in connection with a claim or payment made or to be made in terms of a insurance company
- The statement is material or important to the insurance payment or claim
What Types of Activities Are Considered Insurance Fraud?
Insurance fraud covers many different types of fraud. A few of the more common types of insurance fraud include:
- Automobile Accidents: Staging accidents, exaggerating damage, making repairs that are unrelated to the accident or are simply unnecessary.
- Arson: Burning down a house or company simply to collect insurance proceeds
- Health Care: Exaggerating injuries or using another person's health insurance
- Workers' Compensation: False claims by employees, or denial of Workers' Compensation benefits by employers
What If I Am a Victim of Insurance Fraud?
Insured people are not the only ones that commit insurance fraud. It is possible for a criminal to indirectly commit insurance fraud by conning the insured, thus resulting in the insurance company to have to pay a claim to the insured. Moreover, if the insurance company refuses to compensate the insured party who was defrauded, they may be acting in bad faith and subject to fines and other liability.
What Are the Penalties for Insurance Fraud?
Insurance fraud penalties can be put into two categories called either “soft fraud” or “hard fraud.”
- Soft fraud: Soft fraud is when a person exaggerates or overstates the damages caused by a car accident. Soft fraud is usually considered a misdemeanor that can be punishable by fines, jail time, community service, and probation.
- Hard fraud: Hard fraud occurs when a person fabricates a loss for the purpose of obtaining insurance payments. Hard fraud is a felony that is punishable by strict penalties including the possibility of incarceration in state prison for a number of years.
Should I Talk to an Attorney If I Am Accused of Insurance Fraud?
Insurance companies do not take fraudulent claims lightly, and they generally have the resources to pursue a fraud claim to the end. Insurance fraud can be considered a very serious crime because of the amount of money at stake. If you are accused of or have been a victim of insurance fraud, you should consider consulting a criminal defense attorney to learn more about your rights, defenses, and the what to expect while dealing with the legal system.