South Carolina Life and Health Practice Exam

What is the term for an applicant intentionally lying to an insurance company to obtain a cheaper premium?

1. Misrepresentation

2. Fraud

3. Deception

4. Concealment

The correct answer is: Fraud

The term for an applicant intentionally lying to an insurance company to obtain a cheaper premium is fraud. In the context of insurance, fraud involves deliberately providing false information with the intent to deceive the insurer. This can include misrepresenting facts on an application or omitting relevant information that could affect underwriting decisions and premium calculations. Fraud is considered a serious offense within the insurance industry as it undermines the principles of risk assessment and fairness. When applicants engage in fraudulent activities, they not only jeopardize their own coverage but can also affect the cost of insurance for all policyholders due to increased claims costs for insurers. In contrast, although misrepresentation may seem similar, it can refer more broadly to any inaccurate information provided, which could be unintentional, while fraud is specifically about intent to deceive. The other terms, such as deception and concealment, also relate to misleading actions but do not carry the same legal and financial implications in the context of obtaining a premium discount as fraud does.