Insurance Fraud Fibs Have Huge Consequences

insurance fraud

In our society, we’ve grown accustomed to “little white lies” that allow us to get away with telling non-truths, without letting our conscience get in the way. However, there are some instances when failing to tell the truth just won’t fly, no matter how innocent it may seem, especially when it comes to insurance policies.

Unfortunately, in many circumstances, telling a little white lie could translate into major insurance fraud with significant repercussions.

Soft Insurance Fraud vs. Hard Insurance Fraud

We’ve all told a small fib or two in our lives. Usually, we do it to make our lives a little bit easier or to sidestep some type of result we want to avoid. While telling small fibs is typically viewed as a harmless practice, it can actually have serious repercussions, depending on who is on the receiving end.

When it comes to insurance, we know to avoid the major lies, such as crashing a car on purpose then saying we don’t know how it happened, or burning down a home then saying we saw a neighbor run away from the property with a gas can and pack of matches. These actions are known as hard insurance fraud.

Soft insurance fraud, on the other hand, can be viewed by some as an innocent mistake on an insurance application. Here are some examples of soft fraud in each insurance category:

  • Auto insurance fraud: Grade faking (lying about high grades to receive student discounts).
  • Life insurance fraud: Smoking omission (failing to share on a life insurance policy that you smoke in order to receive a lower rate).
  • Home insurance fraud: Faking losses (claiming an item was lost in a fire or theft that was actually damaged or lost previously).
  • Health insurance fraud: Name removal failure (failing to take a name off of a policy after a divorce, or once a child is no longer a legal dependent).

Other types of fraud include lying about where you live (attempting to reduce insurance premiums by lying about living in a specific location) and missing drivers (failing to list all drivers living in a household).

One would think that there are no consequences for this type of fraud, but there are indeed insurance fraud penalties associated with telling little white lies.

Insurance Fraud Penalties Can be Steep

Though something seemingly simple like writing the wrong address or omitting a driver on a policy doesn’t seem like a big deal, even if you accidentally commit auto insurance fraud, lying to insurance companies can result in pretty steep consequences.

Committing an act of soft fraud is usually viewed as a misdemeanor. While some insurance companies won’t push for an insurance fraud investigation and will simply choose to cancel the offender’s policy, penalties can be far more severe.

Among the many consequences of soft fraud an offender can face are community service and probation. And depending on the seriousness of the offense, a person could even face jail time and/or restitution reaching into the tens of thousands. Ouch!

How Small Fibs Can Turn Into Major Insurance Fraud Cases

We are accustomed to hearing about the major insurance fraud cases where a person burns his own house down or drives her own vehicle over a cliff, but the smaller cases of soft fraud aren’t always highlighted in the media.

This, of course, doesn’t mean they don’t occur. To give you an idea of the consequences associated with soft fraud cases, here are three cases:

1. Ineligible Subscriber

Blue Cross Blue Shield of Michigan Anti-Fraud Hotline received an anonymous call from a person who claimed a subscriber had added a domestic partner to his health insurance policy, though he was still married. After conducting an investigation, the insurance company discovered that the subscriber had lied on his policy, noting that he wasn’t married (though he was still in the process of divorcing) and stating that his girlfriend had been living with him for two years, as required by the company to add a domestic partner.

The company found that claims had been submitted for the girlfriend totaling more than $30,000. The subscriber was charged with health insurance fraud — false statement, which results in a four-year felony.

2. Faking the Single Life

Maria Demeter of Hillsborough, N.J. was prosecuted after falsely claiming that she lived by herself since 1999, though she had been actually living with her husband the entire time. Her husband reportedly had a lousy driving record, which would have added about $35,000 to her auto insurance costs over the years. After pleading guilty to auto insurance fraud, she was ordered to pay $39,000 in restitution, $4,000 for a phony claim made and 50 hours of community service.

3. False Identity

In 2010, a man was arrested by special agents of the Attorney General’s Office in his city for using his cousin’s dental insurance card to obtain dental work from two different dentists. He pleaded guilty to the crime later that year and received a sentence of three years probation, 200 hours of community service and the requirement to pay restitution of $5,985.

One would think that some of these fibs were relatively harmless. What bad can really come from someone adding or omitting a person from a policy — or even using someone’s insurance card, when the policyholder wasn’t using it anyway?

Insurance companies see these small lies as a form of theft that is costing thousands of dollars, which is why they punish offenders heavily.

If you want to avoid insurance fraud consequences, be as honest as possible when filling out any insurance applications. The repercussions just aren’t worth the few dollars saved.