The White Collar Crime of Insurance Fraud
By: LawInfo
Published: 11/2008
Many Americans have many different types of insurance that are designed to protect them from the high financial consequences of certain situations. For example, many Americans pay for automobile insurance, homeowners or renters insurance and health insurance. Those types of insurance policies protect policy holders in the event a qualifying situation such as a car accident, home robbery or illness occurs. Insurance companies can pay out a lot of money to cover those types of expensive incidents. For that reason, some people try to commit the white collar crime of insurance fraud to try and get insurance proceeds in the absence of a qualifying event.
The Crime of Insurance Fraud
There are several different ways in which someone who makes a fraudulent insurance claim may be held accountable. The vast majority of states have made insurance fraud a state crime and the federal government has made making fraudulent claims to a health insurer a federal crime. It is also important to note that those who make fraudulent insurance claims may also be held civilly liable for breaching their insurance contract.
Some states classify insurance fraud into two different categories. The first category is hard fraud which is defined as a claim by someone who purposely plans or invents the loss in order to receive payment. For example, a person might desire a new car and therefore vandalize his or her car and seek a monetary insurance payment. The second category is soft fraud which is defined as a legitimate claim that is exaggerated for the purpose of obtaining additional financial benefit. A person could, for instance, experience a burst pipe in his or her home and claim that the water did damage to valuable clothes and books that actually dried out just fine.
Professionals are also in a unique position to commit insurance fraud. Since some professionals regularly bill insurance companies in order to receive payments they could add a few claims in for work that was not actually completed. Doctors and dentists, for example, could bill health insurers for procedures that they did not perform or auto mechanics could bill auto insurance companies for repairs that they did not make.
Possible Sentences for Insurance Fraud
Most state governments and the federal government impose both a fine and a prison sentence on those convicted of insurance fraud. The exact penalties vary from state to state and depend on the level of fraud for which the defendant is convicted.
It is often said that white collar crimes are victimless crimes because they are not violent. That description is not accurate, however. We all pay for the crime of insurance fraud by paying the cost of higher insurance premiums. It is a real problem that affects every insured American and it is a crime that carries a significant punishment for the perpetrator.
Therefore, the state and federal governments have an important responsibility in prosecuting the white collar crime of insurance fraud in order to make sure that the insurance system works fairly and efficiently and that honest Americans can continue to afford quality insurance policies.
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