Insurance Fraud and Enforcement
Fraud indicators and duties
Insurance fraud includes false claims, inflated damages, staged accidents, phantom medical treatment, premium fraud and misrepresentation on applications. Adjusters should watch for inconsistent loss descriptions, late reporting after a prompt deadline, altered receipts, duplicate photographs, prior similar claims, and pressure for quick cash settlement. A red flag is not proof. The adjuster should document the anomaly, continue handling the legitimate portion, and refer the file through the insurer’s special investigation unit.
Reporting and immunity
New Mexico’s Insurance Code and fraud-enforcement framework authorize OSI to investigate fraudulent insurance acts and to refer matters for criminal prosecution. Insurers and licensees should report suspected fraud to OSI or law enforcement as required or permitted, and good-faith reporting is protected. The adjuster should preserve evidence and avoid making unfounded accusations to the claimant.
Enforcement
OSI may issue cease-and-desist orders, impose civil penalties, require restitution, and suspend or revoke producer or adjuster licenses. Criminal penalties vary with the amount and intent. Enforcement can also follow a pattern of unfair claim practices, not just intentional fraud.
Worked example
A water-damage claim includes a contractor invoice for $18,000, but the adjuster’s photos show only two affected rooms and the invoice lists three rooms. The contractor supplies a revised invoice with the same invoice number. The correct response is to document the discrepancy, preserve both versions, pay only the verified covered damage, and refer the suspected inflation to the SIU/OSI. The adjuster should not confront the contractor with an accusation of felony fraud or pay the disputed amount to close the file.
Traps
Do not ignore red flags because the loss is otherwise covered. Do not destroy or clean up evidence. Do not promise criminal outcomes or conduct an independent criminal investigation. Do not confuse a licensing complaint with a criminal referral; both may proceed.