Illinois Insurance State Practice Exam 2025 - Free Insurance Exam Practice Questions and Study Guide

Insurance fraud negatively impacts consumers primarily by leading to higher premiums and potentially resulting in stricter underwriting practices. When fraud is prevalent within the insurance system, insurers experience increased losses, which they often offset by raising premiums for all policyholders. This is because the costs associated with fraudulent claims must be covered, and these costs are spread across the entire pool of insured individuals.

Moreover, the manifest presence of insurance fraud can prompt insurers to adopt more rigorous underwriting standards. This means they may become more selective about whom they insure, which can limit access to coverage for some consumers who may pose minimal risk but are categorized under more stringent guidelines due to the overall potential for fraud in the system. Thus, consumers can feel the repercussions of insurance fraud not only through increased costs but also through reduced accessibility and flexibility in insurance products.