What is Insurance Fraud?
Insurance fraud refers to any intentional act designed to deceive an insurance company, thereby obtaining an unfair or unlawful advantage or depriving a victim of their legal rights. The National Association of Insurance Commissioners (NAIC) defines it as the deliberate deception by an insurance company, agent, adjuster, or consumer to gain illegitimate benefits.
Insurance fraud can manifest at any stage of the insurance process—whether buying, using, selling, or underwriting insurance—and can be perpetrated by consumers against insurers, or vice versa.
The Impact of Insurance Fraud
Insurance fraud is estimated to cost the industry over $100 billion annually. This not only burdens insurance companies and threatens their viability but also imposes higher premiums on consumers, negatively affecting the economy and society at large. Fraudulent activities continue to evolve, impacting all insurance types, with the most common forms being:
- Automobile Insurance: Often viewed as the most affected by fraud.
- Workers’ Compensation: Fraud can be committed by both employees and employers, particularly in economic downturns or high-risk industries.
- Health Insurance: Medical fraud can be extremely costly, both financially and in terms of lives lost, due to the complexities of the healthcare system.
What It Means to Us
At Orion Financial Services, we take insurance fraud seriously. Our agents are trained to identify fraudulent attempts and prevent them during every encounter. If you misrepresent yourself or provide answers that indicate a willful intent to deceive an insurer, we will document this and inform the carrier.
What It Means to You
Insurance fraud is often mistaken for a victimless crime, yet it significantly affects everyone by increasing premiums. Consumers are encouraged to report any suspicions of illegal activity to their state insurance department before purchasing a policy. Many state insurance departments have anti-fraud units that work with law enforcement to prosecute fraud.
How You Can Help Detect Fraud
Our experienced employees play a crucial role in detecting insurance fraud, and information from vigilant citizens can be invaluable. If you suspect insurance fraud, please report your observations to us or contact your state’s insurance commissioner. You can also file a consumer complaint via the Online Fraud Reporting System managed by the NAIC.
Federal and State Statutes Penalizing Insurance Fraud
Federal Law: The Fraud Enforcement and Recovery Act (FERA) of 2009 expands the federal government’s ability to prosecute insurance fraud, particularly in healthcare. Penalties can include substantial fines and imprisonment.
Connecticut: Under Connecticut General Statutes § 53a-119, insurance fraud is classified as a class D felony, with penalties including imprisonment for up to 5 years and fines up to $5,000.
New York: In New York, Penal Law § 176.05 defines insurance fraud as a crime. First-degree fraud is a class B felony, punishable by 5 to 25 years in prison.
Florida: Florida Statutes § 817.234 addresses insurance fraud, classifying it as a third-degree felony, with penalties including up to 5 years imprisonment and fines of $5,000.
South Carolina: According to South Carolina Code § 38-55-530, insurance fraud can lead to criminal charges classified as felonies, with penalties including imprisonment and substantial fines.
Recent Case Law in Connecticut
Recent cases in Connecticut have reinforced the seriousness of insurance fraud. For example, in State v. Sanchez, the court upheld stringent penalties for individuals found guilty of defrauding insurers, emphasizing the need for strict deterrence against such acts.
For additional information on insurance fraud, please visit www.insurancefraud.org.
If you wish to file a consumer complaint you may do so via the Online Fraud Reporting System which is run by the National Association of Insurance Commissioners.