Insurance fraud is any act committed with the intent to obtain a fraudulent outcome from an insurance process. This may occur when a claimant attempts to obtain some benefit or advantage to which they are not otherwise entitled, or when an insurer knowingly denies some benefit that is due.
The most common act of insurance fraud is when an insured individual or entity makes a false or exaggerated insurance claim, seeking compensation for injuries or losses that were not actually suffered. But it’s not just individuals committing fraud against insurance companies; insurance fraud is also committed against individuals. A couple of examples of this are: (1) the sale of unlicensed or bogus insurance to an individual and (2) an insurance broker or agent’s diversion or theft of insurance premiums paid by individuals.
The following is a list of the most common forms of insurance fraud:
- Premium Diversion – Put simply, this is embezzlement of insurance premiums by an insurance agent. The agent collects the premium from the client but uses the money for personal use rather than sending it on to the underwriter. Selling insurance without a license and then refusing to pay claims even though premiums have been paid is another form of premium diversion or embezzlement.
- Selling coverage you don’t want or need – You may already have a policy that is exactly what you need but your agent convinces you to buy a new policy. Even though the policy/coverage is real, it may be unnecessary and expensive when the policy you had was perfectly fine. Three examples of this are churning, sliding or twisting.
California insurance fraud laws are designed to punish those who make false claims. For example, an individual would be committing insurance fraud by submitting a claim based on a false, exaggerated or deliberate injury or loss. A doctor, who inflates their billing or charge for services not performed, commits insurance fraud. This is true for any other type of service that is performed for the benefit of an individual and paid for by an insurance company.
There are defenses to insurance fraud. In order for the prosecution to prove that an individual committed insurance fraud, they must prove that the defendant actively and intentionally took steps to benefit from a claim that they did not have a right to. What if the individual mistakenly or genuinely believed that their claim was legitimate? Then there was no intent to defraud.
The penalties can be quite harsh, depending on the specific type of insurance fraud and the details of the act. The amount of money involved or, defrauded, also has an affect on punishment. These types of crimes are generally filed as felonies and can result in prison time as well as hefty fines. A court may also require that the defendant pay restitution to the victim of the fraud.
As mentioned above, there are defenses to insurance fraud, as well as alternative sentencing. A good criminal defense attorney, experienced in defending insurance fraud cases, can help get the best possible outcome.