Insurance fraud raises costs for insurers, and those costs get passed on to honest customers through higher premiums, stricter underwriting, and fewer discounts — plus if you are found to have committed fraud, your rates will go up a lot (and you can also face denial of claims, cancellation, fines, or criminal charges).

How fraud drives everyone’s premiums up

• Higher payouts → higher costs for insurers. When insurers pay fraudulent or inflated claims, that’s money they must recover somehow. Much of that recovery comes from raising premiums across their book of business.

• More anti-fraud overhead. Detecting and fighting fraud requires special investigators, legal fees, and technology — those operating costs are also reflected in rates.

• Less predictable loss history. Fraud increases claim frequency/severity, which makes insurers charge more conservative (higher) prices or tighten terms.

• Market effects. Large fraud waves (e.g., staged accidents in a region) can trigger insurer rate filings with state regulators, producing across-the-board increases or surcharges for customers in affected states.

How it affects you personally

• If you file legitimate claims: You may see slower claim handling or more scrutiny (more questions, inspections) because carriers tighten procedures in response to fraud in the system.

• If your claim is flagged as suspicious: It can be denied, investigated, and reported to databases like CLUE or similar (used by insurers to check claims history). A denial or a fraud finding can lead to nonrenewal, cancellation, and large premium increases — and possibly civil/criminal penalties.

• If you’re innocent but live in a high-fraud area: Insurers may charge higher rates for everyone in that area or add anti-fraud surcharges.

• If you’re convicted of fraud: Expect steep increases, difficulty getting affordable coverage, or being placed on assigned-risk markets.

Common types of fraud that drive costs

• Staged or phantom auto accidents

• Exaggerated bodily-injury or property damage claims

• Arson for profit (property insurance)

• Faked thefts or inflated valuables claims

• “Soft” fraud — policyholders exaggerating legitimate claims

What you can do (as a policyholder)

• Avoid filing small/ambiguous claims when the cost of the claim roughly equals or is less than your premium increase or deductible — insurers tend to penalize frequent claim filers.

• Document everything for legitimate claims (photos, receipts, police reports) so investigators can’t misclassify your claim as suspicious.

• Ask about discounts (claims-free, multi-policy, security devices, good driver, defensive driving) — these often offset systemic premium increases.

• Check your claims history (e.g., request your CLUE/consumer claims report in the U.S.) to ensure there are no mistaken or fraudulent entries in your name.

• Report suspected fraud to your insurer or state insurance fraud bureau — honest customers helping reduce fraud help lower costs for everyone.

If you’re accused of fraud

• Don’t admit fault or sign detailed statements without advice.

• Get your claim documentation organized (photos, receipts, witnesses).

• Contact your agent and, if necessary, an attorney experienced in insurance disputes.

• Cooperate, but insist on fair handling and a written explanation if a claim is denied.