Concept and Legal Framework of Insurance Fraud
Insurance fraud refers to the illegal act in which policyholders or beneficiaries make false statements, fabricate claims, or manipulate existing damages in order to unjustly obtain insurance benefits. Insurance fraud is a criminal offense in Germany, stemming from specific legal provisions as well as general criminal law norms.
Definition and Distinction
The term “insurance fraud” encompasses all actions by which a person obtains insurance benefits to which they are not entitled. Typically, damages are fabricated, manipulated, deliberately caused, or actual damages are exaggerated regarding their extent. For criminal evaluation, the type of insurance affected is irrelevant—both property insurances (e.g., home contents, motor vehicle, or building insurance) and personal insurances (e.g., life, health, or accident insurance) are covered.
Criminal Law Classification and Statutory Provisions
Insurance Fraud as a Criminal Offense
Insurance fraud is not a specific criminal offense on its own, but is generally prosecuted as fraud under Section 263 of the German Criminal Code (StGB). A punishable act regularly exists when the perpetrator deceives the insurance company, resulting in financial loss to the insurer.
Elements of the Offense of Fraud
- Deceptive Act: Deception can consist of feigning false facts, distorting true facts, or failing to disclose information that one is obliged to provide.
- Error: The insurance company must be misled by the deception.
- Disposition of Property: As a result of the error, the insurance company provides a benefit or waives rights it is entitled to.
- Financial Loss: The insurance company thereby suffers a financial loss.
- Intent: The perpetrator must act intentionally, i.e., know that the information is false or misleading and intend to obtain an unlawful financial advantage for themselves or a third party.
Possible Sentencing Range
The penalty for fraud under Section 263 StGB ranges from a fine to imprisonment of up to five years, and in particularly serious cases up to ten years.
Special Provisions in Criminal Law
In addition to the general criminal offense of fraud, Section 265 StGB (“insurance abuse”) regulates special cases in which insured items are deliberately destroyed, damaged, or disposed of in order to receive insurance benefits. This offense may be applied in addition to Section 263 StGB. Section 265 StGB also provides for imprisonment of up to three years or a fine.
Civil Law Consequences of Insurance Fraud
Exemption from Payment by the Insurance Company
According to Section 81 of the Insurance Contract Act (VVG), if the insured deliberately causes an insured event or deliberately breaches a contractual obligation, the insurer is completely released from the obligation to pay. Payments already made may be reclaimed.
Rescission and Withdrawal
In the case of fraudulent deception, an insurer may declare the rescission of the contract in accordance with Section 22 VVG in conjunction with general provisions or withdraw from the contract under Section 19 VVG. Fraudulent deception exists if the policyholder intentionally deceives the insurer or conceals risk-relevant facts.
Forms and Methods of Insurance Fraud
Typical Manifestations
Insurance fraud can occur in a wide variety of forms. The most common types include:
- Faking a Loss: A claim is reported that never actually occurred.
- Manipulation of Damages: An actual damage is misrepresented as to its extent or cause.
- Staging Accidents: For example, traffic accidents are deliberately caused to claim benefits from accident, motor, or health insurance.
- Misappropriation of Insured Objects: Disposing of or destroying property in order to obtain insurance benefits.
- Multiple Claims: An identical damage is claimed multiple times with different insurers.
Attempted Insurance Fraud
Even the attempt to commit insurance fraud is a punishable offense (Section 263 (2) StGB). The threshold to criminal liability is crossed relatively early, for example, simply by submitting a manipulated claim form.
Procedures and Investigation of Insurance Fraud
Criminal Investigation and Prosecution
Law enforcement agencies typically initiate an investigation as soon as an insurer reports a suspicion of insurance fraud. Insurers are authorized under Section 31 VVG to file criminal charges if there is reason to suspect fraud.
The evidence includes:
- Documents (e.g., claim notifications, expert reports)
- Testimonies from witnesses
- Technical inspections or expert reports (e.g., for fire damage or accidents)
- Investigations by private detectives or special units of the insurer
Cooperation Between Insurer and Police
Insurance companies often have special anti-fraud departments and work closely with law enforcement authorities.
Insurance Coverage in Case of Misrepresentation and Breach of Obligation
Under Section 28 VVG, the policyholder is obliged to correctly and fully disclose all information relevant for assessment during claim notification and processing. Intentional misrepresentation regularly entitles the insurer to refuse payment and may lead to rescission or withdrawal from the contract.
Statistical and Economic Significance of Insurance Fraud
Insurance fraud poses a significant problem for the insurance industry. According to estimates by the German insurance sector, every year, damages worth billions of euros are caused by fraudulent acts. This has a negative impact on premium levels and on the contractual relationships of all policyholders.
Prevention and Combatting of Insurance Fraud
Insurers have a legitimate interest in preventing and clarifying fraudulent actions. The measures include, among other things:
- Expansion of prevention systems (e.g., databases for claims monitoring)
- Use of modern analytical technologies for pattern recognition
- Employee training on fraud indicators
- Cooperation with authorities and other insurers
Conclusion
Insurance fraud is a serious criminal offense in Germany and results in both criminal and civil consequences. The statutory regulations range from the general offense of fraud to special provisions, to civil law denials of benefits and the possibility of rescission. Insurance fraud endangers the solidarity of the insured community and is the subject of intensive prevention and investigative measures by the insurance industry and governmental authorities.
Frequently Asked Questions
What criminal consequences are there for insurance fraud?
Anyone who commits insurance fraud must expect severe criminal consequences in Germany. Fraud is punishable under Section 263 of the German Criminal Code (StGB) and, in the insurance context, includes attempting to obtain insurance benefits through deception. The penalties range from fines to imprisonment of up to five years, or in particularly serious cases, up to ten years. Particularly serious cases include, among others, gang-related offenses or causing an insured event by arson (Section 265 StGB). The court may also impose additional penalties such as supervision orders or professional bans. The initiation of a criminal investigation may result in entries in the police certificate of good conduct, which can have professional and social consequences.
What are the civil law consequences of insurance fraud?
In addition to criminal sanctions, civil law consequences also occur. The insurer is entitled under Section 823 BGB to reclaim amounts that were paid out unjustly. Furthermore, the insurer may terminate the insurance contract without notice and sue the policyholder for damages. If a claim is reported fraudulently, coverage for the relevant claim usually ceases entirely. Insurers are also permitted to record the incident in the insurance industry’s warning and information system (HIS), making it significantly more difficult to obtain insurance in the future.
When is the line crossed between an inaccurate statement and punishable insurance fraud?
The distinction between a merely negligent incorrect statement and criminally relevant insurance fraud is legally significant. For the offense of fraud under Section 263 StGB, intent is required: the policyholder must intentionally deceive the insurer about material circumstances in order to gain a financial advantage for themselves or a third party. Mere negligent misstatements generally only result in a denial of payment under civil law. Only once intent and a deceptive act are proven to coincide is the threshold to criminal liability crossed. Courts typically examine motivation, knowledge, and the specific elements of the act very closely.
Are insurance companies required to report suspected insurance fraud?
Insurance companies are required to notify the public prosecutor’s office if there is sufficient suspicion of insurance fraud. They may conduct their own investigations and, for example, consult experts to clarify the background of a claim. As soon as initial suspicion arises, they are obliged under Section 138 of the German Criminal Procedure Code (StPO) to report or at least inform investigative authorities. The policyholder is usually informed of this during a claim review, especially if payment is delayed and there are follow-up questions.
Can an attempted insurance fraud already be punishable?
Yes, an attempted insurance fraud is punishable under Section 263 (2) StGB. It is sufficient if the perpetrator, with direct or conditional intent, fakes or misrepresents an insured event in a relevant manner, even if the attempt is discovered and no financial loss occurs. Incitement and aiding and abetting insurance fraud are also covered by law and result in liability according to Sections 26, 27 StGB.
Does proven insurance fraud affect other contracts with the same insurer?
When insurance fraud is uncovered, it can have significant effects on the entire contractual relationship with the respective insurer. The insurer may terminate all existing contracts without notice and end the business relationship permanently. Entry into the industry information system ensures that other insurers are also informed about the fraud case and may refuse to enter into contracts as well. Rehabilitation in the insurance sector is considerably more difficult for many years, sometimes for life.
