Which type of fraud is characterized by intentional exaggeration of claims to increase profits?

The choice of soft fraud is accurate because it specifically refers to the act of intentionally exaggerating a legitimate claim, often to secure a larger payout than what is warranted. This type of fraud does not involve outright faking events or creating false claims, which distinguishes it from hard fraud. Soft fraud typically involves cases where the claimant's assertion of loss or damage includes inflated figures or embellishments that are not strictly true but are still based on actual events.

While hard fraud involves more blatant forms of deceit, such as fabricated accidents or completely false claims, soft fraud operates in a gray area where the original claim is valid but has been manipulated for gain. This nuance is critical in understanding different fraud types and their implications within the insurance industry. As for the other types listed, medical fraud refers specifically to fraudulent activities within healthcare claims, and policy fraud typically involves wrongdoing related to the terms of a policy itself rather than the exaggeration of claims. Thus, soft fraud is the most fitting classification for the intentional exaggeration of claims aimed at increasing profits.