Who Can Face Charges of Insurance Fraud?

 Posted on February 28, 2024 in Fraud

Insurance fraud costs the average American household an additional $400 to $700 in increased premiums annually. Insurance fraud is an increasing problem, estimated to cost more than $40 billion per year.

Insurance fraud can be committed by an insurance agent, adjuster, contractor, or even consumer, which can land the offender in federal prison.

If you or a family member are facing charges of insurance fraud, our Chicago criminal defense attorney is here to provide legal representation.

Common Insurance Fraud Schemes

Insurance fraud is the defrauding of an insurance company, another party, the state government, or the federal government for financial means. This defrauding can take place in a number of ways but does involve an individual making a false representation.

The most common insurance fraud schemes include:

Premium Diversion

Premium diversion may involve one of two schemes: embezzlement of insurance funds or selling insurance without a license.

An embezzlement of funds scheme normally involves an insurance adjuster failing to send premiums to an underwriter. The adjuster will instead keep the money for his or her own personal use.

When a person sells insurance without a license, they will collect premiums but never pay on claims.

Fee Churning

A scheme to defraud people who have bought insurance, fee churning involves agents selling insurance policies and repeatedly taking commissions. This is done until there is no money left to pay the claims.

At this time, a business is left to pay claims; a business that was intended to fail. While each transaction by itself seems legitimate, the fraudulent activity becomes clear as a whole.

Disaster-Related Fraud

Weather events can increase fraudulent schemes. One notable event was Hurricane Katrina, which hit the Gulf Coast in August 2005. Fraudulent schemes included contractors inflating the cost of repairs or requiring upfront payment without fulfilling services, policyholders filing false or exaggerated claims, and charity fraud scams.

Asset Diversion

A person may steal the assets of an insurance company through asset diversion. In asset diversion, an individual purchases a company by taking out a loan. The assets of the company are used to pay off the debt, and the individual pockets the remainder.

Workers’ Compensation Fraud

If an insurance company offers workers’ compensation insurance at a lower cost than you can find elsewhere, it is probably too good to be true. Workers’ compensation fraud is on the rise. It involves offering a discounted rate, collecting a business’s money, and then never providing insurance.

18 U.S.C. §1033

Federal insurance fraud involves anyone who takes part in an insurance business involving interstate commerce that intentionally makes a misrepresentation or overvalues any land or security.

Under 18 U.S.C. §1033, the deception must be made in a financial report or document presented to an insurance agency or examiner that influences the person’s actions.

If you are found guilty of insurance fraud under federal law, you will be facing fines of up to $10,000 and the potential for 10 years in federal prison. You may be imprisoned for 15 years if you jeopardize the financial stability of the insurance company.

Legal guidance is a necessity if you are facing allegations of insurance fraud. Our Chicago white-collar crime attorney can help mitigate the charges brought against you.

Speak with our Chicago, IL, White Collar Crime Attorney Today

Insurance fraud can land you in jail and financially ruin you, not to mention the damage it can do to your reputation. If you are facing insurance fraud charges, reach out to our Chicago, IL, white-collar crime attorney at your earliest convenience. Contact the office today online or by calling 312-629-0669 to schedule your free consultation.