What Is Insurance Fraud

insurance-fraud

According to an estimate by the Coalition Against Insurance Fraud, insurance companies lose $80 billion a year to fraud. Therefore, insurance companies charge higher premiums as a way to make up for these losses. Keep reading to learn about insurance fraud punishments and more.

 What Is Car Insurance Fraud?

Firstly, under Illinois state statue 720ILCS 5/17-10.5, a person commits insurance fraud when he or she:

  1. Knowingly obtains; or
  2. Attempts to obtain; or
  3. Causes to be obtained;
  4. By deception;
  5. Control over the property of an insurance company;
  6. Makes a false claim;
  7. Intends to deprive the insurance company permanently of its property.

Additionally, car insurance fraud is any attempt to receive an undeserved payment from an auto insurance company. These acts range from exaggerating injuries from an accident, to giving false information to insurance agents to avoid higher premiums and even planning a collision. Therefore, these can be classified as soft or hard fraud.

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Soft Insurance Fraud

Secondly, soft fraud is taking advantage of a situation already at hand. For example, someone involved in a car accident may exaggerate their injuries to receive more compensation. 

If a vehicle had damage before a collision, a person may say the damage was caused by the accident. Because this type of fraud is so hard to prove and so easy to do, it is the most common type to commit.

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Hard Insurance Fraud

Thirdly, hard insurance fraud is a planned, deliberate act to receive an undeserved payment from an auto insurance company. An example of hard fraud is staging a small car accident. The policyholder will file a claim with the auto insurance company, gets an estimate for the damages and collect the insurance check but does not get the car repaired.

In Illinois, the insurance fraud punishment is the attempted or collected value from the auto insurance company.

In conclusion, the penalties for car insurance fraud are as follows:

  • $300 or less, Class A misdemeanor, punishable by up to one year in jail and a fine up to $2,500
  • $300-$10,000, Class 3 Felony, punishable by a minimum of two years and up to five years in jail and fines up to $25,000
  • More than $100,000, Class 1 Felony, punishable by a minimum of four years and a maximum of 15 years in jail and fines up to $25,000
  • If you have any information about insurance fraud, contact the Illinois Department of Insurance.

    Need to know more about insurance fraud punishments? Our team is here to help. Call us today at 1-888-949-6289 or visit your nearest Insurance Navy location. Our offices are open from 8 a.m. to 9 p.m. CST, 7 days a week.