What is insurance fraud?
Insurance fraud is any false claim filed or a knowing act committed to defraud an insurance company. This occurs when a claimant attempts to obtain insurance benefits when there is, for example, premium diversion, fee churning, asset diversion, and workers compensation fraud. Perpetrators in these schemes can be insurance company employees or claimants.
How is the crime of insurance fraud prosecuted in California?
In California, the crime of insurance fraud is typically prosecuted by the state’s Department of Insurance. The department has a specialized unit, called the Fraud Division, which is responsible for investigating and prosecuting insurance fraud cases.
Insurance fraud in California can be charged as a felony or a misdemeanor, depending on the specific circumstances of the crime. For example, making a false insurance claim with the intent to defraud is a felony and can result in imprisonment in state prison for up to five years and a fine of up to $50,000.
If the insurance fraud involves a large-scale scheme or if the fraud results in significant financial loss, the penalties may be more severe. For example, if the fraud results in a loss of more than $950, the defendant may be charged with grand theft, which is also a felony and can result in imprisonment in state prison for up to three years.
In addition to criminal penalties, a conviction for insurance fraud can also result in civil penalties, including fines, restitution, and revocation or suspension of professional licenses.
What are some types of insurance fraud?
Health or Life insurance Fraud
This type of insurance fraud usually occurs at the application stage, when applicants misrepresent the status of their health, income, or other personal information in order to get a better or cheaper rate or premium. Since online or telephonic applications are common, life insurance fraud has been easy to commit. Life insurance could also involve faking death to claim life insurance.
Auto insurance Fraud
This type of fraud could be perpetrated by an individual, a fraud ring, or a group who may fake traffic collision injuries or deaths. This could occur by staging collisions to make false insurance claims or exaggerated medical treatments and bills to collect insurance money.
Property insurance Fraud
If a home owner or renter damages or destroys his own property in order to claim insurance payments, or seek payment for property that was not destroyed or damaged, there is insurance fraud. Arson could also lead to insurance fraud as a separate crime.
