Which category of fraud would likely be considered less severe, involving exaggeration rather than outright fabrication?

The correct choice is soft fraud, which refers to situations where a policyholder exaggerates their claims rather than fabricating them entirely. This type of fraud tends to be seen as less severe because it doesn't involve creating false information or outright lies about events that never happened. Instead, individuals may inflate the extent of a loss or the value of a claim; for instance, claiming more damage than what actually occurred.

Soft fraud can often stem from a belief that "everyone does it" or that the added claim amount is justified for various reasons, such as perceived inadequacies in the insurance system. Understanding this context is crucial for adjusters, as it helps differentiate between claims that may require further investigation and those that represent standard exaggeration. In contrast, other categories of fraud, like hard fraud, involve more serious offenses, such as completely faking an incident to obtain money from an insurance policy. This distinction enables insurance professionals to prioritize their investigations and allocate resources effectively.