PSI Ohio Insurance Practice Exam 2026 – Complete Preparation Guide

In the context of insurance, misrepresentation and fraud are crucial concepts that impact the validity of insurance contracts and the relationship between the insurer and the insured.

Misrepresentation refers to a situation where an individual makes a false statement regarding a material fact, often without any intention to deceive. For example, if someone mistakenly states that they have had no prior claims when they have, this could be considered misrepresentation, as the individual may genuinely believe that the statement is true. Misrepresentation can occur innocently or without intent to deceive, which distinguishes it from fraud.

Fraud, on the other hand, involves a deliberate act of deception aimed at securing an unfair or unlawful gain. In fraud, the individual knowingly presents false information or conceals important information, fully aware that their actions could mislead the insurer for their benefit. Fraud is a more serious violation within the realm of insurance as it involves wilful intent to deceive, and it can have significant legal consequences.

Thus, understanding the nature of these two concepts, misrepresentation being characterized as a false statement, while fraud involves a broader scheme of deception, highlights a fundamental distinction between them in insurance dealings.