Definition - What does Fraud mean?
Fraud is the illegal act of deceiving, lying, or manipulating another party in the insurance industry. Both buyers and sellers can commit fraud. Buyers can commit insurance fraud by making false claims, lying about medical records, and other important details. Insurance sellers can commit fraud by selling illegitimate policies, not submitting premiums, and engaging in other deceptive practices. People found guilty of insurance fraud can face jail time and other legal consequences.
Insuranceopedia explains Fraud
The way that insurance is supposed to work is that insurance buyers are supposed to provide accurate information about themselves, buy policies from legitimate companies, and only make claims when they have legitimate reasons to do so. However, this does not always happen. For example, a car insurance policyholder may want a new car and decides to "accidentally" crash their car into a tree for the purposes of having a cause to file a claim so the insurance company would pay for a new car up to the policy limits. This is only one example, as there are various ways insurance fraud may be committed.
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