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Insurance Fraud Laws and Penalties

Insurance Fraud Laws and Penalties

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Posted by-Lawerslog
Member Since-29 Dec 2015

What is insurance fraud?

Insurance fraud is when someone tries to deceive an insurer to get the money they don't have. In all 50 states, this type of fraud is a crime. Most states have fraud bureaus that can identify and investigate fraud cases. According to the extent and nature of fraud, fraudulent claims in most states can either be a felony or a misdemeanor. Federal law also criminalizes certain types of fraud, such as health care fraud.

Incorrectly withholding benefits from policyholders or healthcare providers can be a sign of fraud when Insurance Companies Don't Cover You: Fraud or Bad Faith.

Fraudulent insurance claims can have a devastating impact on society, not just the insurance companies. Because insurance companies charge higher premiums for fraud losses, policyholders and consumers ultimately bear the costs. As a result, the individual and business premium rates rise, and businesses often pass on the higher costs to their customers.

This article will cover the elements of insurance fraud and the penalties for fraudulent insurance convictions. You can also read Laws about Fraud to learn more about scams and their consequences.

I was intentionally making a misleading or false statement.

Insurance fraud is similar to other types of fraud. The defendant must knowingly make false or misleading statements or tell a lie, just like other fraud. It is not enough. The defendant must also intend to make the false statement. For example, if a person files an automobile insurance claim and mistakenly claims that his vehicle has covered 100,000 miles but covers 112,000 miles, it does not amount to fraud. However, if a person discovers later that an assertion he made to his insurer while claiming automobile insurance is false, even though he didn't know it at the time, he must inform his insurer.

This statement is related to a claim or payment that was made or will be made under an insurance policy.

False statements must not have been made to support, oppose, or connect with any claim or payment under an insurance policy. For example, false or exaggerated claims can be made to insurance companies, false statements to physicians in connection to insurance claims, and false statements by medical providers to insurance companies about the services they provided.

This statement is material.

Insurance fraud must exist if the false statement is material or significant to the claim or insurance payment. For example, a person filing an insurance claim may claim that his business has received awards for customer service. Although the person may have lied to the insurer, it is not a fraud. This is because the statement regarding receiving awards was not relevant to his claim.

Common Types of Insurance Fraud and Examples

Insurance fraud can take many forms. Below are some examples of insurance fraud.

  • Healthcare. This happens when a person, or business, defrauds an insurance company. To obtain prescription medication or payments, someone might pretend to have suffered a false injury. This fraud is also common when doctors and dentists submit claims to insurance companies for services they didn't perform. Federal law also makes health care fraud illegal.
  • Automobile claims. It occurs when someone fabricates or exaggerates a claim to their automobile insurer. 
  • Life. When a person tries to get life insurance payments by creating death, it is called fraud. A person who falsifies a death certificate for a family member to get his life insurance payment is guilty of fraud.
  • Property. This fraud involves home, business, and other insurance policies covering real property (land, buildings, or personal property). This fraud is committed by a business owner who sets fire and steals his business. To get a payment, a jewelry owner may claim that the valuable piece was lost. Property insurance fraud can also involve exaggerating damages due to a legitimate loss to get a higher price. For example, someone who suffered a pipe burst at his home may claim more damages than what happened.

Penalties

Two types of insurance fraud are generally recognized in the industry: "Soft fraud" and "hard fraud."

  • Soft fraud is when someone exaggerates a claim. For example, a person may overstate the damage caused by a car crash. 
  • Complex fraud is when someone causes or fabricates loss to obtain insurance payments. Complex fraud can be considered a felony and could result in severe penalties, including possible imprisonment for several years in state prison.

Insurance fraud penalties can vary depending on where they were committed, how much money was obtained or sought, and what criminal history the defendant has—common crimes and punishments by the state for more information.

State Penalties & Crimes

Even common crimes like burglary can have different details from one state to the next. You can read the statutes and court cases to determine how your state defines and penalizes a specific crime. Or, better yet, read an article.

We are constantly updating articles, so please bear with us if you don't see your state's crime listed.

Alabama Crimes: Laws and Penalties

What sentence is the prosecutor required to prove? Is it a range? And what factors could influence a judge's decision to impose a lower sentence or a higher sentence? Finally, is there any legal defence to this charge?

This page contains information about specific Alabama crimes. You can also find citations to the laws (see "Looking up the Law" below for details on how to search the law online). Usually, however, you will find the information you need in our summaries.

You must understand that no legal article can replace a skilled criminal defence attorney who regularly practices in your area. You can only use the "letter of the law" as a guide. It would help if you worked with your attorney to learn how the quality and quantity of evidence in your case can affect your options. These options could include negotiating a plea or going to trial.

Illinois Crimes: Laws and Penalties

What evidence must the prosecutor prove to obtain a conviction? What sentence is the prosecutor required to prove? Is it a range? And what factors could influence a judge's decision to impose a lower sentence or a higher sentence? Finally, is there any legal defence to this charge?

This page contains information about specific Illinois crimes. You can also find citations to the Illinois laws (see "Looking up the Law" below for details on how to search the law online). Usually, however, you will find the information you need in our summaries.

You must understand that no legal article can replace a skilled criminal defence attorney who regularly practices in your area. You can only use the "letter of the law" as a guide. It would help if you worked with your attorney to learn how the quality and quantity of evidence in your case can affect your options. These options could include negotiating a plea or going to trial.

Get Help

Consult a criminal defence lawyer if you are being charged with insurance fraud. An experienced attorney can help explain the laws and give advice on possible defences. They will also inform you about your rights.

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