Do you know what insurance fraud is?

A survey by the Pennsylvania Insurance Fraud Prevention Authority revealed that while 70 percent of Pennsylvanians said they would not commit insurance fraud, knowledge of what constitutes insurance fraud was scant and few understood that the crime was a serious offense.

To educate the public about the seriousness of insurance fraud, the authority has launched an advertising campaign, utilizing television and radio advertisements plus billboards.

There also will be outreach programs to business and community groups. Residents also can learn about the crime by visiting www.helpstopfraud.org.

“Insurance fraud is a lie told to steal,” said Ralph Burnham, executive director of the authority, a state agency created by the Legislature in 1997 as a mechanism to help law-enforcement agencies fight the crime.

Those funds are generated by assessing insurance companies that write policies in the state, he said in a telephone interview from his Mechanicsburg, Cumberland County, office. No taxpayer dollars are used, he said.

The majority of people are honest, Burnham said.

“Insurance is based on trust,” he said.

The consumer trusts that the company will protect them when the need arises and the insurer trusts that the policyholder will be honest, he said.

“Insurance fraud is a betrayal of that trust,” he said, adding that sometimes insurance agents betray their trust by taking consumers’ money for the purchase of an annunity or life insurance and then keeping the money for themselves.

Fraud leads to an increase in cost of policies because the insurance companies have to investigate each claim to prevent it, he said.

Fraud adds about $300 annually to the overall cost of the various types of insurance that a person normally purchases, he said.

Because of that financial harm to everyone, the Legislature created the agency and listed the crime as a felony, punishable by up to seven years in jail and fines of up to $15,000 plus restitution, he said.

Nationwide, there are $30 billion in losses due to fraud on automobile, homeowners and workers’ compensation policies and $68 billion on health-care policies, he said.

One example of fraud is someone driving without insurance and getting into an accident, he said. The driver then buys insurance, waits a while, and then reports the accident to the insurer to collect. Those persons get caught easily because investigators for the insurers merely have to check police records for the date of the accident, he said.

Not all fraud cases are listed as such, he said. Sometimes the cases turn up as another offense such as making a false report to authorities.

Last year, the number of suspected cases of insurance fraud reported to authorities was 2,305, an increase of around 30 percent from 2007, he said.

That increase, mirrored in other states, appears to be due to the poor economy, he said.

Fraud impacts certain parts of the state more than others, he said.

In Johnstown and Richland Township, police officials said that they have not seen an increase in insurance fraud.

“It’s a good idea to get the word out,” said Johnstown police Capt. Andrew Frear about the awareness campaign.

“Obviously, people should have a good idea that if they falsify a claim, that it would be a violation of the law.”

Richland police investigator Kevin Lehman said they see fraud in a variety of ways including one that all police departments see – arson of a reported stolen car.

He said people who are not able to make the car payments report the vehicle stolen and then either burn it themselves or have someone else do so and then report it so that they can collect insurance to pay off the loan.

He said the bad economy has not caused fraud to increase here yet, but that his department is being vigilant.

Burnham said state Rep. Bryan Barbin, D-Johnstown, is the primary sponsor of a tougher insurance-fraud bill recently introduced in the state House.

The bill would required all insurance companies to report suspected fraud, he said.