Which of the following is an example of premium fraud?

Premium fraud occurs when individuals provide false information or misrepresent facts during the application process to obtain lower insurance premiums. The correct answer illustrates this concept effectively. By claiming to have attended driving school when he did not, the man seeks a discount that he is not entitled to, which directly alters the premium calculation.

This type of misrepresentation ultimately harms the insurer as they base premium rates on the assumption that all applicants have accurately reported their qualifications and driving history. Should the false claim come to light, it could lead to severe penalties for the applicant, including potential denial of claims or cancellation of the policy.

In contrast, the other examples present different scenarios. While they involve misrepresentation or omissions, they may not specifically relate to the calculation of premium discounts in the same way that enrolling in a driving school would. For instance, exaggerating the home value or omitting previous accidents pertains more to the accuracy of overall risk assessment rather than directly manipulating premium costs based on erroneous qualifications. Retrofitting a vehicle does relate to performance but does not impact the stated qualifications for discounts or premiums directly either.