Fraudulent insurance claims

This chapter critically discusses fraudulent insurance claims and mechanisms for fighting against insurance fraud. Chinese law draws a line between a civil wrong and a criminal offence for insurance fraud in terms of the amount of money involved in the fraud; the threshold amount for criminal prosecution of insurance fraud is now ¥50,000. If the insurance money obtained by the fraudster is less than the threshold, civil liability will be pursued by art. 27 of the Insurance Law, under which the insured will be paid for the genuine part of a fraudulently exaggerated claim. The flaw of the law is that the insured pursuing an exaggerated claim is allowed to tell lies with virtual impunity. It is recommended that the insurer be entitled to reject the whole claim where the claim is dishonestly and substantially exaggerated. Chinese Criminal Law (art. 198) treats insurance fraud as a result offence. The law punishes the accomplished offence and the attempted offence differently, with very slight punishment on attempters; there seems no justifiable reason for such a divergence in punishment. It is recommended that art. 198 of the Criminal Law be reformulated to create a new offence of insurance fraud, that is, the attempted and the consummated offence be reduced to the same offence. The full offence would be committed upon the insured&s;s making a fraudulent misrepresentation to the insurer with intent to gain insurance money. By this reform, the criminal law on insurance fraud would place the emphasis on the prevention and punishment of fraudulent conduct, not the outcome of the conduct.