---
title: "Insurance Fraud: Definition, Examples and Penalties | Riskado"
description: "Insurance fraud is deliberate deception on an application, premium or claim to get a benefit you are not owed. See its effect on claims and CT and NY penalties."
url: "https://riskado.com/insurance-terms/insurance-fraud/"
lang: "en"
published: "2026-04-03"
modified: "2026-10-01"
image: "https://riskado.com/og/default.jpg"
alternates:
  es: "https://riskado.com/es/terminos-de-seguros/fraude-de-seguros.md"
---

# Insurance fraud

Updated Oct 1, 2026

Insurance fraud is deliberate deception by an insurer, agent, adjuster, provider or policyholder to get an insurance benefit they are not entitled to. It can involve an application, a premium, a policy or a claim. For a policyholder, it can mean a denied claim, cancellation or nonrenewal, civil penalties or criminal charges.

Also called: fraud

Insurance fraud turns on intent. It means knowingly giving false or incomplete information, or hiding something material, to get an insurance benefit, and it can happen on an application, in a premium payment or on a [claim](https://riskado.com/insurance-terms/claim/). An honest mistake is not automatically fraud, but it is still worth correcting before you sign or submit a form. The fraud warning above the signature line on many applications and claim forms is there because some states require it.

## What fraud does to a claim, in numbers

Fraud is defined by the [NAIC (opens in a new tab)](https://content.naic.org/insurance-topics/insurance-fraud) as "a deliberate deception to obtain an illegitimate gain." Here is how it changes a homeowners claim. Say a covered repair costs $12,000 and your [deductible](https://riskado.com/insurance-terms/deductible/) is $1,000. If instead the claim is knowingly inflated to $20,000, the standard [ISO homeowners form (opens in a new tab)](https://home7.selectiveinsurance.com/FormsPDF/HO/HO0003.200010.PDF) lets the [insurer](https://riskado.com/insurance-terms/insurer/) deny [coverage](https://riskado.com/insurance-terms/coverage/) under its "[Concealment](https://riskado.com/insurance-terms/material-misrepresentation/) or Fraud" condition.

An honest $12,000 claim compared with a fraudulent $20,000 claim

Hover or tap a row to highlight it.

| Item | Honest claim | Inflated claim |
| --- | --- | --- |
| Amount claimed | $12,000 | $20,000 |
| Deductible | $1,000 | Not reached |
| Insurer pays | $11,000 ($12,000 minus $1,000) | $0 if denied for fraud |
| You pay for the repair | $1,000 | $12,000 |
| New York civil penalty, maximum | None | $25,000 ($5,000 plus the $20,000 claim) |

The $12,000 loss and $1,000 deductible are illustrations. The penalty comes from [N.Y. Insurance Law § 403 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/ISC/403), which allows up to $5,000 plus the amount of the claim for each violation, in addition to possible criminal charges.

## The forms fraud takes

Hard fraud means deliberately creating a loss, such as staging an accident or destroying property. Soft fraud means exaggerating a real loss or lying on an application, according to the [NAIC (opens in a new tab)](https://content.naic.org/insurance-topics/insurance-fraud). Application fraud is misstating or hiding a material fact to get coverage or a lower [premium](https://riskado.com/insurance-terms/premium/). Claim fraud covers fictitious, inflated or duplicate claims.

Fraud can also run against the [policyholder](https://riskado.com/insurance-terms/policyholder/). In premium diversion, an agent or broker keeps your payment instead of sending it to the insurer, which can leave you believing you have coverage that was canceled or never issued, according to the [NAIC (opens in a new tab)](https://content.naic.org/article/consumer_insight_insurance_fraud.htm). Fake-insurer fraud means paying a bogus or unlicensed company that may never pay a claim. Provider fraud includes billing for services that were never given. Before you pay, you can confirm an agent's and insurer's license with the [state insurance department](https://riskado.com/insurance-terms/insurance-commissioner/), and our guide on [how to choose an insurance agent](https://riskado.com/how-to-choose-an-insurance-agent/) covers what else to check.

## Fraud compared with insurance abuse

Fraud requires intentional deception for an unauthorized benefit. Abuse is broader: practices that are inconsistent with sound business, fiscal or medical standards and create unnecessary costs, even without proven intent to deceive. Fraud and abuse are not the same thing, and most improper payments in health programs are not necessarily fraud, according to [CMS (opens in a new tab)](https://www.cms.gov/newsroom/fact-sheets/improper-payments-fact-sheet).

## Where you see fraud language

Fraud can come up in auto, homeowners, renters, condo, life, health, pet, workers compensation and business insurance. You meet it on quote and application questions about use, ownership, location, prior losses, health or payroll, and in the policy's conditions, where a "Concealment or Fraud" clause sets what the insurer can deny. [Endorsements](https://riskado.com/insurance-terms/endorsement/) can change those conditions. It also appears on binders, renewal notices, claim and proof-of-loss forms, examinations under oath, claim letters and explanations of benefits. The New York Department of Financial Services advises consumers never to sign a [blank insurance claim form (opens in a new tab)](https://www.dfs.ny.gov/consumers/fraud_cyber_protection).

## How Connecticut and New York treat insurance fraud

Connecticut makes insurance fraud a class D felony under [Conn. Gen. Stat. § 53a-215 (opens in a new tab)](https://www.cga.ct.gov/current/pub/chap_952.htm#sec_53a-215). The crime is presenting a written or oral statement, including computer-generated documents, in support of an application or claim while knowing it contains false, incomplete or misleading material information, with intent to defraud. Health insurance fraud is covered separately by [Conn. Gen. Stat. § 53-442 (opens in a new tab)](https://www.cga.ct.gov/current/pub/chap_949e.htm#sec_53-442), with penalties under the larceny statutes plus restitution, attorneys' fees and investigation costs under [§ 53-443 (opens in a new tab)](https://www.cga.ct.gov/current/pub/chap_949e.htm#sec_53-443).

New York defines a fraudulent insurance act in [N.Y. Penal Law § 176.05 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/PEN/176.05) as knowingly and with intent to defraud presenting a written statement that contains materially false information or conceals material information. Since May 27, 2026, hiring, encouraging or orchestrating someone else to stage a motor vehicle accident also counts, according to [New York Circular Letter No. 3 (2026) (opens in a new tab)](https://www.dfs.ny.gov/industry-guidance/circular-letters/c32026-01). Section 403 requires fraud warnings on commercial, accident and health, and auto applications and claim forms, and [N.Y. Insurance Law § 405 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/ISC/405) requires licensed insurance participants to report apparent fraud to the Superintendent within 30 days. Insurance fraud is a crime in 48 states, according to the [NAIC (opens in a new tab)](https://content.naic.org/insurance-topics/insurance-fraud).

## Questions to ask an agent or insurer

1.  Is anything on this form about me, the property, vehicle, business, health or loss inaccurate or incomplete? Material false information on a signed form can create fraud exposure.
2.  Where is the policy's "Concealment or Fraud" condition, and what does it let the insurer deny? Property forms can deny coverage for intentional misrepresentation or false statements.
3.  Has my premium been applied to an active policy, and when will I receive the policy, ID card or binder? Premium diversion can leave you without coverage you paid for.
4.  What documents should I send with this claim, and can I correct an error before signing? A claim form creates a written record.
5.  If I suspect fraud by an agent, provider or repair shop, where do I report it? State insurance departments and fraud bureaus investigate reports.

## Frequently asked questions

Short answers to common questions about insurance fraud.

### Is an honest mistake insurance fraud?

Not automatically. New York's definition requires knowledge, intent to defraud and materially false or concealed information. Correct the error promptly and ask the insurer in writing how the correction affects your application or claim.

### Does insurance fraud only happen with claims?

No. It can happen during buying, selling, underwriting, rating, premium payment or claim handling, by consumers or by insurance professionals.

### What should I do if an agent or company seems fraudulent?

Stop before signing or paying, confirm the insurer and agent are licensed with the state insurance department, get the coverage details in writing, and report the concern to the state.

## Related terms