Texas General Lines — Life, Accident, Health and HMOGeneral InsuranceHard
An insurance applicant for a life insurance policy knowingly makes a false statement on their application regarding their medical history, intending to deceive the insurer and obtain coverage they would otherwise be denied. This act would be considered:
- AChicanery
- BFraud
- CTwisting
- DMisrepresentation
Show answer & explanationAnswer & explanation
Correct answer: B. Fraud
Fraud involves an intentional misrepresentation or concealment of material facts made with the intent to deceive (scienter) and for personal gain, leading to harm for the other party. The key here is 'knowingly makes a false statement' with 'intending to deceive'.
Why the other options are wrong
- A. Chicanery broadly refers to deception or trickery, but 'fraud' is the specific legal term in insurance.
- C. Twisting is a deceptive practice where an agent convinces a policyholder to drop an existing policy to purchase a new one, to the detriment of the policyholder.
- D. Misrepresentation is a false statement of fact. While fraud includes misrepresentation, fraud adds the element of 'intent to deceive' and 'for personal gain'.
Insurance Fraud
Any act or omission intended to gain a benefit or advantage to which one is not otherwise entitled, or to deny a benefit that is due, by means of misrepresentation or concealment.
- Requires intent to deceive (scienter).
- Involves material misrepresentation or concealment.
- Aims for personal gain or to cause harm to another.
- Can result in civil and criminal penalties.
Memory trick: Fraud is the grand scheme, misrepresentation is just a false dream.