Good questions! Each state defines insurance fraud differently. But fraud generally happens when someone intentionally deceives another about an insurance matter to receive money or other benefits not rightfully theirs. Here are some actions that usually aren't frauds:
- good-faith disagreement between an insurance company and consumer about a claim
- decision by the insurance company to decline your insurance application, or not renew your coverage
Insurance fraud may be classified as "hard" or "soft." Hard fraud is a deliberate attempt either to stage or invent an accident, injury, theft, arson or other type of loss that would be covered under an insurance policy.
Soft fraud, which is sometimes called opportunity fraud, occurs when a policyholder or claimant exaggerates a legitimate claim. A car owner involved in a "fender bender" who pads the claim to cover the policy deductible is committing soft fraud. Another example is exaggerating the number and value of items stolen from a home or business. Soft fraud may also occur when people purposely provide false information to influence the underwriting process in their favor when applying for insurance. To lower insurance premiums or increase the likelihood that the application for insurance will be accepted, people may underreport the number of miles driven, misrepresent where a car is garaged, fail to provide an accurate medical history when applying for health insurance, or falsify the number of employees and the nature of their work for workers compensation coverage.