Which of the following statements about fake claims vs. padded or exaggerated claims is true?

The statement that fake claims are based on losses that never occurred is accurate. This type of fraud involves submitting a claim for an event or situation that did not happen at all, such as claiming that a car was stolen when it was not or asserting personal injuries from an accident that never took place. This creates a scenario where the insured seeks financial gain from the insurance company by fabricating loss or damage, thus violating the principles of insurance integrity.

In contrast, padded or exaggerated claims involve legitimate incidents but inflate the amount of coverage sought beyond the actual damages incurred. Understanding this distinction is crucial, as it illustrates different methods of committing fraud within the insurance sector. While both practices are fraudulent, they differ significantly in their nature and execution.