Insurance Fraud - Not a Victimless Crime
Steven C. Arter, Supervisory Special Agent,
Insurance Fraud Section,
Pennsylvania Office of Attorney General
The Office of Attorney General's Insurance Fraud Section began operation and acceptance of referrals during August, 1995. Since then, over 1,500 referrals alleging insurance fraud have been reviewed by the Section, resulting in more than 700 criminal investigations and 160 arrests for insurance fraud and related criminal acts.
While many of those arrested are repeat offenders with criminal histories including theft and fraud-related offenses, almost half of those charged with insurance fraud are first-time offenders with no prior criminal history. These offenders, when questioned about their conduct, are typically shocked that they are the subject of a criminal investigation. After all, they say, "Haven't I paid thousands of dollars in premiums to insurance companies?" "Is it wrong to try and recoup some of those premiums with a fraudulent claim when the opportunity arises?" "Are the insurance companies really going to miss a few thousand dollars?"
The answer is simple. Insurance fraud is a very serious crime. In fact, the cost of insurance fraud, conservatively estimated at over $50 billion annually nationwide, is usually passed along to consumers through increased premiums. Therefore, in reality, insurance fraud is a crime in which most of us are "victims."
What is insurance fraud and what are the personal consequences of being arrested for insurance fraud?
Insurance fraud is described in the Pennsylvania Crimes Code at Section 4117. For the consumer, the most relevant provisions of this statute, at the key times of fraud, are as follows:
1. During Application: Making any material false statement on an insurance application to receive insurance you may not be entitled to or to receive a lower premium than one you are entitled to, is a criminal act punishable by imprisonment of up to 5 years and a fine of up to $10,000 or both.
For example, lying about a known pre-existing medical condition, the condition of personal property or even your address on an insurance application may not only void the coverage but subject you to criminal prosecution.
2. During the Insurance Claim: Making any material false statement, oral or written, on an insurance claim in order to receive benefits to which you are not entitled, including increased benefits, is a criminal act punishable by imprisonment of up to 7 years and a fine of up to $15,000 or both.
Examples of Insurance Fraud
Example 1: You want to upgrade your car stereo system but can not raise the $3,000 for the system you want. You sell your existing system to a friend for $1,200, break a window on your car and file a theft report to the local police. You then file an insurance claim for the stereo equipment and receive a benefit check in the amount of $1,500 for the "stolen" equipment. You now have $2,700 cash to use toward the system you really want.
Example 2: This time your car really is broken into and your $300 radio is stolen. However, when you fill out the affidavit of theft for the insurance company, you claim that a state-of-the-art CD changer and speakers valued at over $1,500 was stolen and provide a "borrowed" receipt from a friend to support your claim that you owned this equipment.
Example 3: You are playing football with friends and seriously injure your back. Instead of going to the doctor immediately, you recognize an opportunity and suffer through the night in pain. At work the next day you stand next to a heavy box and, when no one is looking, fall to the ground screaming in agony. You are rushed to the hospital where the doctor discovers several dislocated vertebrae. The next day you complete worker's compensation forms falsely claiming you were injured in the workplace.
In each of these examples the subjects have committed insurance fraud, even if they never receive any money from the insurance company. These examples are from actual case files and resulted in the arrest and prosecution of the individuals involved.
The bottom line is that insurance fraud is a crime that is taken very seriously by the Office of Attorney General. People need to understand that partaking of this activity, which they may view as "victimless," in reality, impacts millions of consumers. Additionally, it can lead the offender to have a criminal record, serve substantial jail time and be obligated to pay large fines.