Insurance fraud is a crime. And it costs all of us.
What is insurance fraud?
Any act committed with the intent of fraudulently receiving payment from an insurance company is considered insurance fraud. Misrepresentation or omission of material facts when applying for insurance is also considered insurance fraud. Insurance fraud occurs with every type of insurance – including auto insurance, homeowners insurance, and renters insurance. And it’s more than just reporting something that did not occur — it is exaggerating the consequences of what did, or even going so far as to stage an incident in order to collect payment illegally.
Hard insurance fraud and soft insurance fraud
The insurance industry has defined hard insurance fraud as those activities that involve planned or staged incidents of theft, accident, or injury in order to collect payment. Soft insurance fraud is considered exaggeration of otherwise legitimate claims for purposes of collecting a larger payment than otherwise due. It also includes misrepresenting information when obtaining your insurance policy in order to benefit from a lower premium.
How does insurance fraud cost you money?
Filing fraudulent claims is a crime. And it costs you money. How? The FBI estimates the total cost of insurance fraud (excluding health insurance) is more than $40 billion per year. In order to cover payout of these fraudulent claims, insurance premiums are increased. Based on the FBI estimates, insurance fraud ends up costing the average U.S. family between $400 and $700 per year in higher premiums. That hurts all of us.
The consequences of insurance fraud
Those who commit insurance fraud are guilty of a crime. They are subject to both state and federal prosecution, depending upon the circumstances.