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How Severe are the Penalties for Insurance Fraud?

Considered a “white-collar” crime, insurance fraud is a crime that people frequently think of as a minor offense – if they even realize it is a crime at all. It’s a crime that you could commit unwittingly. However, insurance fraud can be a very serious crime that can be investigated and prosecuted by state and/or federal authorities. If you have been accused of committing insurance fraud, it is in your best interest to take the accusation seriously and mount a defense immediately. Insurance fraud attorney Michael J. Wynne has the experience, skills and commitment needed to launch an aggressive defense and ensure that your rights are protected.

Insurance Fraud Facts and Figures

According to the FBI, there are more than 7,000 companies in the US offering insurance. Collectively, these companies collect more than $1 trillion in premiums every year. The sheer size of the industry makes it an attractive target for various types of fraud. In fact, experts estimate the cost of insurance fraud to be more than $40 billion per year – and that figure doesn’t include health insurance fraud. The cost trickles down to consumers, increasing the average family’s premiums by around $500 per year.

Is Insurance Fraud a Minor Offense?

In the U.S., we put a premium on insurance. Most people purchase several types of insurance policies that protect things such as their house, vehicles, health, and life. Just as there are different types of insurance policies, there are also different ways to commit fraud. In general, insurance fraud is categorized as “soft fraud” or “hard fraud.” Soft fraud occurs when a valid claim exists; however, the claimant exaggerates the damage or losses suffered. Hard fraud refers to an outright fabrication that is intended to deceive the insurance company. In most states, soft fraud is a misdemeanor while hard fraud is a felony offense.

Examples of Insurance Frauds

Broadly defined, insurance fraud includes any act or omission that is intended to result in a benefit or advantage to which the perpetrator is not legally entitled. Common examples of insurance frauds, by category of insurance, include:

Life Insurance Fraud

  • Application fraud – This occurs when one knowingly provides incorrect information when applying for a life insurance policy. Typically, an applicant tries to hide negative health information. The insurance underwriters will conduct a review of your medical history, which often uncovers the “material misrepresentation.” If it was an honest mistake, it may only result in a higher premium; however, an intentional misrepresentation could result in charges for fraud.
  • Claims fraud – In simple terms, this refers to faking the death of the insured and will almost certainly result in serious criminal charges.

Car Insurance Fraud

  • Stolen car fraud – this is an example of “hard fraud” wherein an insured either sells the vehicle to a “chop shop” for parts or sells the vehicles to a buyer outside of the US and then reports the vehicle stolen.
  • Car accident fraud – there are numerous variations of this type of fraud, most of which involve at least one driver and one “victim” that stage an accident. The “victim” then files a claim for property damage and personal injuries.

Homeowners/Renters Insurance Fraud

  • Staged fire/vandalism fraud – A homeowner removes expensive covered items from the home and then stages a fire or other act of vandalism. Those items are sold and reported as destroyed/stolen to the insurance company, so the homeowner effectively gets paid twice for the property.
  • Natural disaster fraud – Following a natural disaster, such as a hurricane or tornado, homeowners exaggerate claims or file a claim even though their home wasn’t damaged.

Health Insurance Fraud

  • Application fraud – this involves an applicant omitting pertinent information or including false/misleading information on an application for insurance.
  • Billing fraud – this encompasses a wide range of activity by either the insured or a provider that is intended to prompt the insurance provider to pay for services that were never rendered or that were not medically necessary.

Insurance Fraud Punishment

All types of insurance frauds are crimes that can be governed by state and/or federal law. Insurance fraud punishment will depend, to a great extent, on the type of fraud and whether the defendant’s conduct amounts to “soft” or “hard” fraud. If convicted, you could face up to 20 years in prison. In the state of Texas, Section 35.02 of the Penal Code makes it a crime to prepare a statement that you know contains false or misleading material information that you present to an insurer for payment if your intention was to defraud or deceive the insurer. Types of insurance fraud range in severity from a class C misdemeanor to a first-degree felony in Texas, depending on the value of the claim.

Contact Insurance Fraud Attorney Michael J. Wynne Today

Whether you are being accused of being the mastermind behind an elaborate insurance fraud scheme or of simply omitting critical information on a life insurance application, you need a lawyer who will zealously and skillfully defend you. Michael J. Wynne is a proven, trusted insurance fraud attorney. Contact Michael immediately by calling 281-450-7403 to schedule a free consultation.

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