A recent article in the San Francisco Chronicle called insurance fraud one of the oldest types of fraud recorded in history, citing an example of an ancient Greek ship sunk by its owner to collect insurance money. The article also reminded readers that insurance fraud continues to be pervasive and affects us all, whether as a policyholder or as a shareholder in an insurance company. There are two basic types of insurance fraud depending on the fraudulent party, either the buyer or the seller of the insurance. The buyer can try to manipulate the insurance process to his or her advantage to try to obtain something that he or she is not entitled to. The seller can also try to game the system unfairly to maximize profit. And insurance fraud affects everyone in the insurance system, including innocent parties, because insurance is built on a community of people pooling together to spread the risk. One instance of fraud can affect the costs and risks of everyone in the community.
In California, the Department of Insurance’s Investigation Division deals with customer complaints about unlawful activity by insurance companies. The Investigation Division can send cases documenting serious violations for either administrative or criminal prosecution. Administrative remedies include things like suspending or revoking insurance licenses, restitution to the injured party, and fines or penalties.
The Fraud Division deals with the criminal arm of insurance fraud, and is tasked with enforcing provisions of Chapter 12 of the California Insurance Code (also known as the Insurance Frauds Prevention Act), the California Penal Code sections 549-550, and the California Labor Code section 3700.5. The most common types of fraud that are criminally investigated are automobile property and personal injury, workers’ compensation, health insurance, and residential or commercial property claims.
The California Department of Insurance’s website is a fantastic resource for insurance information, including information about companies dealing with all different types of insurance. It also includes studies and reports, information on applying for licenses, and a special section for seniors and how to avoid scams aimed at California’s elderly. The California Insurance Code section 12921.1 requires that the state publish a Consumer Complaint Study, which can also be found on the website, to help consumers shop for insurance. This study is invaluable to the smart consumer, because it details information about insurance companies including the number of justified complaints in the past three years. The Department of Insurance then ranks the companies of different types of insurance (automobile insurance, homeowners insurance, etc) based on the ratio of justified complaints to number of policies the company holds. So the consumer can directly compare companies when shopping for a particular type of insurance. The Department’s website is very easy to use and navigate, and the Brod Firm’s San Francisco insurance attorneys encourage you to check it out for further information. We also hope that you bookmark this page and continue to stop by as we update this space with new and helpful information related to all areas of California, Oakland, Sacramento, and San Francisco insurance law.