CA Code and Ethics

3. Required fraud training — CDI

3.4. Fraud detection

Our California Insurance Code and Ethics course is currently in development and is a work-in-progress.

Legal consequences of fraud

2 min read

Insurance fraud in California isn’t only a civil matter. It can trigger serious criminal charges and regulatory consequences. The California Insurance Code, along with the Penal Code, spells out penalties for making, helping with, or even attempting fraudulent acts connected to insurance.

Perjury and criminal penalties

Perjury in insurance claims: Under CIC §§1871.2-1871.3, signing a fraudulent insurance application or claim form can be treated as perjury. That’s because claim forms typically require a sworn statement that the information provided is true.
Criminal charges: Insurance fraud may be prosecuted as either a felony or a misdemeanor, depending on the facts and severity of the case. Penalties may include:
- Fines (often ranging from thousands to tens of thousands of dollars)
- Restitution (repaying the insurer for fraudulent payouts)
- Probation or imprisonment (misdemeanor up to 1 year in county jail; felony = up to several years in state prison)

False and fraudulent claims article

Defined in CIC §§1871 and 1871.4: These sections define what counts as a false or fraudulent claim and provide the framework for penalties. Fraud is broadly defined and can include:
- Staging or inflating accidents or losses
- Submitting false documentation or invoices
- Concealing material facts in applications or claims
- Conspiring with others to commit fraud
Applies to all lines of insurance: These fraud provisions aren’t limited to auto or health insurance. They also apply to life, property, casualty, workers’ compensation, and disability coverage.
Proactive fraud prevention: These statutes also push insurers, agents, and brokers to use anti-fraud measures, such as training, SIUs, and fraud detection systems.

Why it matters

Fraud drives up premiums for all California consumers.
Fraudulent claims undermine public trust in the insurance system.
Professionals who fail to report fraud may face regulatory scrutiny or discipline from the California Department of Insurance (CDI).

Fraud isn’t just an ethical violation - it’s a crime with potentially life-changing consequences.

Perjury and criminal penalties

Signing fraudulent insurance forms = perjury (CIC §§1871.2-1871.3)
Insurance fraud: felony or misdemeanor charges
- Penalties: fines, restitution, probation, jail/prison

False and fraudulent claims article

Fraud defined in CIC §§1871 & 1871.4
- Includes staging/inflating losses, false documents, concealing facts, conspiracy
Applies to all insurance types (auto, health, life, property, workers’ comp, disability)
Insurers/agents must use anti-fraud measures (training, SIUs, detection systems)

Why it matters

Fraud increases insurance premiums for everyone
Undermines public trust in insurance
Failure to report fraud risks CDI regulatory action

Legal consequences of fraud

Perjury and criminal penalties

Perjury in insurance claims: Under CIC §§1871.2-1871.3, signing a fraudulent insurance application or claim form can be treated as perjury. That’s because claim forms typically require a sworn statement that the information provided is true.
Criminal charges: Insurance fraud may be prosecuted as either a felony or a misdemeanor, depending on the facts and severity of the case. Penalties may include:
- Fines (often ranging from thousands to tens of thousands of dollars)
- Restitution (repaying the insurer for fraudulent payouts)
- Probation or imprisonment (misdemeanor up to 1 year in county jail; felony = up to several years in state prison)

False and fraudulent claims article

Defined in CIC §§1871 and 1871.4: These sections define what counts as a false or fraudulent claim and provide the framework for penalties. Fraud is broadly defined and can include:
- Staging or inflating accidents or losses
- Submitting false documentation or invoices
- Concealing material facts in applications or claims
- Conspiring with others to commit fraud
Applies to all lines of insurance: These fraud provisions aren’t limited to auto or health insurance. They also apply to life, property, casualty, workers’ compensation, and disability coverage.
Proactive fraud prevention: These statutes also push insurers, agents, and brokers to use anti-fraud measures, such as training, SIUs, and fraud detection systems.

Why it matters

Fraud drives up premiums for all California consumers.
Fraudulent claims undermine public trust in the insurance system.
Professionals who fail to report fraud may face regulatory scrutiny or discipline from the California Department of Insurance (CDI).

Fraud isn’t just an ethical violation - it’s a crime with potentially life-changing consequences.

Key points

Perjury and criminal penalties

Signing fraudulent insurance forms = perjury (CIC §§1871.2-1871.3)
Insurance fraud: felony or misdemeanor charges
- Penalties: fines, restitution, probation, jail/prison

False and fraudulent claims article

Fraud defined in CIC §§1871 & 1871.4
- Includes staging/inflating losses, false documents, concealing facts, conspiracy
Applies to all insurance types (auto, health, life, property, workers’ comp, disability)
Insurers/agents must use anti-fraud measures (training, SIUs, detection systems)

Why it matters

Fraud increases insurance premiums for everyone
Undermines public trust in insurance
Failure to report fraud risks CDI regulatory action

Perjury and criminal penalties

Perjury in insurance claims: Under CIC §§1871.2-1871.3, signing a fraudulent insurance application or claim form can be treated as perjury. That’s because claim forms typically require a sworn statement that the information provided is true.
Criminal charges: Insurance fraud may be prosecuted as either a felony or a misdemeanor, depending on the facts and severity of the case. Penalties may include:
- Fines (often ranging from thousands to tens of thousands of dollars)
- Restitution (repaying the insurer for fraudulent payouts)
- Probation or imprisonment (misdemeanor up to 1 year in county jail; felony = up to several years in state prison)

False and fraudulent claims article

Defined in CIC §§1871 and 1871.4: These sections define what counts as a false or fraudulent claim and provide the framework for penalties. Fraud is broadly defined and can include:
- Staging or inflating accidents or losses
- Submitting false documentation or invoices
- Concealing material facts in applications or claims
- Conspiring with others to commit fraud
Applies to all lines of insurance: These fraud provisions aren’t limited to auto or health insurance. They also apply to life, property, casualty, workers’ compensation, and disability coverage.
Proactive fraud prevention: These statutes also push insurers, agents, and brokers to use anti-fraud measures, such as training, SIUs, and fraud detection systems.

Why it matters

Fraud drives up premiums for all California consumers.
Fraudulent claims undermine public trust in the insurance system.
Professionals who fail to report fraud may face regulatory scrutiny or discipline from the California Department of Insurance (CDI).

Fraud isn’t just an ethical violation - it’s a crime with potentially life-changing consequences.