What would a misrepresentation on an insurance application be considered fraud?

• A. When it is material and intentional
• B. When it is minor and unintentional
• C. When it concerns only rates
• D. When it is true

Answer: (A)

Fraud in an insurance application hinges on two things: the fact must be material, and the misrepresentation must be intentional. A material fact is one that the insurer would consider important in deciding whether to issue the policy or how to price or underwrite it. If someone knowingly provides a false statement about something that matters to the insurer, with the purpose of deceiving, that is fraud.

If the misstatement is minor or unintentional, it isn’t fraud, even though it could affect underwriting or lead to a denial or rescission if discovered. Similarly, a misstatement about rates isn’t automatically fraud unless it’s a deliberate, material deception. An example would be lying about health status on a life insurance application in a way that changes the risk the insurer is taking on, with the intent to deceive.