The Coalition Against Insurance Fraud estimates insurance fraud costs insurers $80 billion each year. Insurance fraud is a crime that affects all coverage lines - auto, homeowners, workers' compensation, health, and life.

There are two broad categories of insurance fraud Hard fraud involves criminal activity, and occurs when an individual fakes a loss to collect money illegally from an insurance company. Examples may include a staged accident, fake injury, made-up theft, arson, false billing, or needless medical procedure. Soft fraud takes place when a normally honest person tells a 'little white lie' to pay lower insurance rates or obtain a bigger claim settlement. This could mean under-reporting vehicle usage, misrepresenting information on the insurance application, overestimating damages, embellishing loss details, and more.

Insurers and government agencies at local, state, and federal levels invest significant resources in the fight against insurance fraud. Individual attitudes and actions have an impact as well. For example:

• Be upfront when applying for coverage. For auto this means reporting accurate vehicle use, garaging location, vehicle operators, etc. For homeowners this means disclosing information about the size of the dwelling, year of construction, updates, pets, home-based businesses, etc. Provide accurate medical information when seeking life or health insurance. Never sign a blank form.
• Be forthright when making a claim. Do not exaggerate the amount of damage. Watch for 'low all' estimates that seem too good to be true. Review the repair bill for accuracy.
• Be wary of strangers that offer quick cash after an auto accident. They could be part of a fraud ring. Avoid 'storm chaser' contractors promising quick repairs following a severe weather event.
• Report suspected fraud right away. Many insurance companies have special fraud investigation units. Government agencies investigate and prosecute insurance fraud as well.