Key tools and resources

Detecting fraud is a critical responsibility for insurers in California. Fraudulent claims increase costs for insurers and, over time, raise premiums for all policyholders. For that reason, California law requires insurers to maintain systems, procedures, and resources to identify, investigate, and report suspected fraud. (CIC §2698.35)

Key tools and resources

Insurance Services Office (ISO)

• ISO is a nationwide information-sharing organization.
• Insurers use ISO databases to compare claims data across multiple companies.
• This helps identify suspicious patterns, such as:
  • The same claimant reporting similar losses to different insurers
  • Multiple claims tied to the same property or individual

Arson database

• Maintained as part of California’s anti-fraud efforts.
• Tracks information about suspicious fire losses and individuals with prior involvement in arson-related cases.
• Helps insurers and investigators identify repeat offenders and potentially fraudulent fire claims.

Internal red flags and trend analysis

• Insurers must develop their own systems to detect unusual claim activity.

Examples of red flags include:

• Claims filed soon after new coverage is purchased.
• Losses inconsistent with reported facts (e.g., stolen items with no receipts or proof of ownership).
• Frequent small claims from the same insured that fit a pattern.

Trend analysis helps insurers spot emerging fraud schemes, including patterns concentrated in specific regions or lines of business.

Fraud warning language

• California law requires all claim forms to include a specific anti-fraud warning. The warning states that making false statements or concealing material facts to obtain insurance benefits is a crime.
• The warning serves two practical purposes:
  • It deters fraud by clearly stating the consequences.
  • It supports enforcement by putting claimants on notice.

Here’s the mandatory fraud warning statement from California Insurance Code §1871.2 that must appear on all insurance claim forms:

“Any person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison.”

• This warning must be clearly printed on all claim forms used in California.
• Its purpose is to deter fraudulent activity by reminding claimants of the criminal consequences of false claims.
• If an insurer fails to include this statement on their forms, they may face regulatory penalties under California Department of Insurance (CDI) rules.
• Similar fraud warning statements are also required in other states, but California’s wording is specific to its Insurance Code.

While California requires very specific language, every state mandates some form of fraud warning. Producers and insurers operating across multiple states must use the correct wording for each jurisdiction to avoid noncompliance.

Below is a comparison table showing California’s required fraud warning language alongside examples from a few other states, so you can see how these requirements differ.

State	Required warning language	Notes
California (CIC §1871.2)	“Any person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison.”	Must appear on all claim forms. Failure to include it may result in regulatory penalties for insurers.
New York (N.Y. Ins. Law §403)	“Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any materially false information, or conceals for the purpose of misleading, information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime, and shall also be subject to a civil penalty not to exceed five thousand dollars and the stated value of the claim for each such violation.”	New York’s statement is among the strictest; it applies to both applications and claims, and includes civil penalties in addition to criminal penalties.
Texas (Tex. Ins. Code §701.051)	“Any person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison.”	Very similar to California’s wording; it reflects nationwide model language but with Texas-specific enforcement.
Florida (Fla. Stat. §817.234)	“Any person who knowingly and with intent to injure, defraud, or deceive any insurer files a statement of claim or an application containing any false, incomplete, or misleading information is guilty of a felony of the third degree.”	Florida escalates the offense to a felony, highlighting the seriousness of fraudulent activity.
New Jersey (N.J. Stat. §17:33A-6)	“Any person who knowingly files a statement of claim containing any false or misleading information is subject to criminal and civil penalties.”	Shorter, simpler statement but still imposes both criminal and civil liability.

As you can see, the exact wording varies by state, but the meaning is consistent: insurance fraud is a crime and can lead to serious penalties.