What Is Insurance Fraud

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According to an estimate by the Coalition Against Insurance Fraud, insurance companies lose $80 billion a year to fraud. Insurance companies charge higher premiums as a way to compensate for these losses.

What is car insurance Fraud?

Under Illinois state statue 720ILCS 5/17-10.5, a person commits insurance 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. By making a false claim;
  7. Intending to deprive the insurance company permanently of its property.

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, giving false information to insurance agents to avoid higher premiums and even planning a collision. The can be classified as soft or hard fraud.

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Soft insurance fraud

Soft fraud is taking advantage of a situation already at hand. For example, a person involved in a car accident may exaggerate their injuries to receive more compensation. If a vehicle already had damage prior to a collision, a person may say the damage was caused by the accident. Because this type of fraud is hard to prove and so easy to do, it is the most common type to commit.

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Hard insurance fraud

Hard insurance fraud is a premeditated, 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 files 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, insurance fraud is punished by the attempted or collected value from the auto insurance company.

The penalties 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.

    Do you need more information on insurance fraud? Our agents and customer service representatives are here to help. Call us today at 1-888-949-6289 or visit your nearest Insurance Navy location. For your convenience, Insurance Navy is open from 8 a.m. to 9 p.m. CST, 7 days a week.