The basic concept of insurance is simple: In exchange for monthly payment, an insurance company agrees to compensate you should you suffer an economic loss. Insurance is helpful when an emergency happens, such as a natural disaster that damages a part of your home or an auto accident that wrecks your car.
However, some might abuse this system and submit fraudulent insurance claims to collect the payout. Others might try to lie on their insurance application to pay lower premiums. Both of these things are insurance fraud, which is a serious and costly crime in Kentucky.
When individuals commit insurance fraud, they are not just taking from insurance companies but also imposing added costs on honest citizens through increased premiums for all policyholders.
Understanding insurance fraud
Under state law, insurance fraud mainly takes three forms – two of which are relevant to consumers, while the other pertains to insurance agents and carrier employees:
- Fake or misleading claims: It’s an offense to submit any written or oral statement as part of an insurance claim, knowing it contains false or incomplete information.
- Application fraud: It’s also an offense to make any statement as part of an insurance policy application or renewal that’s false or misleading.
- Premium embezzlement: For agents and insurance employees, it’s a crime to receive money for the purposes of purchasing insurance for a customer but refuse to obtain coverage. Issuing fake insurance policies and asking for insurance applications/renewals on behalf of a bankrupt carrier also go under this category.
Aiding and conspiring with another to commit any of these violations (such as helping stage an accident for a fraudulent insurance claim) is also an offense.
The penalties for insurance fraud
Insurance fraud is a Class A misdemeanor, which leads to up to 12 months in jail and $500 in fines on conviction. However, the criminal grade and penalties increase depending on the value of the claim, benefit or money involved in the offense:
- $500 or more, but less than $10,000: The offense is a Class D felony, punishable by up to five years in prison.
- $10,000 or more, but less than $1,000,000: The offense is a Class C felony, punishable by up to 10 years in prison.
- $1,000,000 or more: The offense is a Class B felony, punishable by up to 20 years in prison.
Insurance fraud is a crime that affects all Kentuckians, driving up the cost of insurance premiums and undermining the integrity of the insurance system. If you face charges, underestimate them at your peril; a conviction can lead to years of prison time. Consider consulting with a legal professional who can help review your case and protect your rights in court.
