Insurance fraud undermines the purpose of spreading risks and disrupts the insurance system's foundation. It encourages people to exploit insurance contracts for personal gain, harming social reciprocity. Fraudulent claims not only go against the principles of insurance but also damage the trust and fairness of the system. To maintain the integrity of insurance, laws must restrict fraudulent practices and nullify contracts based on deceitful claims. This helps prevent abuse of insurance contracts and ensures that insurance benefits are rightfully distributed.