Insurance fraud: what are the risks and consequences involved?

In 2022, nearly 20 % French people claim to have defrauded their insurance according to a YouGov and LeLynx study. But then, what sanctions are in place to effectively combat insurance fraud? What are the risks and consequences? We take stock together in this article. And as a bonus at the end of the article, an exclusive interview with Emeric Desnoix who answers your most common questions!  

Insurance fraud: some reminders 

Insurance fraud: what is it? 

Insurance fraud is manipulation of the insurance system with the aim of obtaining profit from a contract. 

To take stock of the players in the insurance sector, read our article: zoom on the different insurance sectors

In this fight against documentary fraud within the insurance sector, it isInsurance Fraud Agency (ALFA) which plays a crucial role. It allows you to create a link between insurance companies and legal authorities during proven fraud. 

Note that the risk of fraud can occur at different stages of the contract: 

1- During the subscription 

2- During the lifespan of the contract 

3- At the time of disaster management 

To find out more about the challenges of insurance fraud, go to our dedicated article 👇
Insurance fraud: definition and issues 

The notion of intent in insurance fraud

According to the article L113-2 of the Insurance Code, the insured is obliged to answer precisely the questions asked before taking out an insurance contract.

However, it is possible that an insured person does not answer the insurer's questions correctly or forgets to report a change in situation; he is then responsible. On the other hand, depending on the intention he put into his statements, the sanctions perceived will not be the same. 

What are the differences in sanctions between intentional and unintentional fraud? We take stock in the rest of the article! 

What are the risks in the event of intentional fraud? 

If an insured has intentionally defrauded, it is because he or she intentionally lied to the insurance service. Two cases are then possible: fraud is revealed when signing the contract or it is revealed during disaster management. Let's take a closer look. 

The fraud is discovered when the contract is signed 

If the insurance company becomes aware of a misrepresentation at the time the policy was taken out and wishes to claim fraud, it must prove that the policyholder was dishonest. However, according to thearticle L.113-9 of the Insurance Codethe false information is given in good faith. 

If the insurance succeeds in proving the disloyalty of the insured, the consequences could go fines and of legal proceedings, passing through thejudgment of compensation in the event of a claim, up tocomplete cancellation of the contract. 

The fraud is discovered after the disaster 

If the insurance company notices a false declaration on the part of the insured, during the management of the claim, the penalties will be higher: 

• THE contract may be terminated 
• The insured must reimburse sums previously paid by the insurer, solely in respect of the current claim
• THE sinister is obviously not not compensated 
• THE health and compensation costs for victims are the responsibility of the insured 
• Insurance can also carry out legal proceedings civil or criminal proceedings against dishonest policyholders

What are the risks in the event of unintentional fraud? 

If an insured has unintentionally given the insurer the wrong information (for example, through error or ignorance), he or she has not deliberately lied to the insurance company. Once again, two cases are possible: the error is revealed by the insured or the fault is revealed by the insurer. Let's take a closer look. 

The fraud is discovered by the insured

If the insured notices a fault in his contract, he can modify it again by indicating it to your insurer. The insurer can then make the necessary modifications. 

The fraud is discovered by the insurer 

If it is the insurer who discovers the negligence in the contract, it then has two solutions: 

• He increase simply the insurance premium
• He decides to terminate the entire contract

False claims reporting: what are the consequences? 

It is now common practice to make false claims in order to obtain compensation, but wrongly. The aim? To receive money that you should not have received, or to have compensation paid that the insurer would not have paid if it had been aware of the true situation.

In France, this type of scam is punishable by law since it is qualified as criminal offense. 

According toArticle 313-1 of the Penal Code, the penalties can range from 375,000 euros fine until 5 years in prisonexcluding aggravating factors (such as organised crime).

It is also important to note that in use case of fake, the penalty incurred is 45,000 euros fine and can go up to 3 years of imprisonment (Article 441-1 of the penal code).

How can we fight insurance fraud in the long term? 

As an insurer, you can deploy several tools to effectively combat document fraud to insurance. 

At Finovox, we have implemented a SaaS solution that allows you toreview documents and identify changes made. How does it work? The solution works thanks to consistency analysis algorithms, visual analysis, statistical and computer science developed by our researchers. After dragging the documents into our solution, they are analyzed one by one to determine whether they are original files or whether they have been falsified. If they have been modified, Finovox explains how and indicates the defrauded area. 

The goal of Finvovox is simple: not to miss a falsified document. Whether the document was created from scratch by a fraudster or modified using editing software, Finovox offers you its complete analysis. With our solution, review all your documents, of all types and in all languages! Interested ? Request a demo. 

Insurance fraud: Emeric Desnoix, lawyer and anti-fraud advisor, answers your questions! 

To answer your most frequently asked questions, Emeric Desnoix, associate lawyer and national referent in the fight against fraud and the fight against money laundering with companies and mutual insurance companies, agreed to participate in our interview! 

Insurance fraud and aggravated insurance fraud: what are the differences? 

Emeric Desnoix: 

This is not a distinction legal, strictly speaking; rather, it is born from practice and derives from the “aggravating” circumstances of the Penal Code.

Insurance fraud, so-called simple, involves a litigant (often insured, but not always…) who intentionally deceives their insurance; he then obtains an advantage, often of a financial nature. 

Conversely, aggravated insurance fraud, which generally involves large sum of money (for one or more claims), is carried out in organized gang, which requires a specific strategy to detect it and then manage it.

Moreover, the nature of the response and the insurer's determination generally vary depending on whether the fraud of which it is the victim is “simple” or “aggravated”.

Can an insured person purchase insurance after previously being convicted of insurance fraud? 

Emeric Desnoix: 

If, as an insurer, you come across an insured who has already been found guilty of fraud, the decision is yours. Indeed, several options are available to you: 

• You decide to trust the insured and accept the subscription of the said contract
• You offer him higher insurance policies than what is usually done 
• YOU refuse to insure this new subscriber 

However, he there is no file in France listing fraudsters, condemned as such by the courts.

At the subscription stage, such detection is therefore very difficult to carry out.

Insured vehicle file: what is it? 

Emeric Desnoix: 

The Insured Vehicle File (FAV), created in 2016 and made available to law enforcement in 2019, lists the registration plates of all vehicles.
It is supplied by insurance companies when a motorist subscribes. 

This file is widely used in the fight against AUTO insurance fraud, which represents a very significant share (in number of claims) of frauds committed in France.

For this reason, the FAV is a valuable tool used, in particular, ARGOS.