your family member will be examined very carefully, especially if the $ are big, and will eventually get caught in the lie. At that point, they might get prosecuted, but at a minimum, the insurance company won't pay anything.
About 6 years ago, I got rear-ended while waiting for traffic to clear so I could make a RH turn into a gas station. I was riding my motorcycle, had my turn signal on and did everything legally. But a guy in a Ford F-150 came up behind me and he was looking down so he could call his girlfriend on his cell phone. He admitted in his statement that he wasn't even looking out the windshield when he hit me.
I got punted hard upon impact and my neck and back were messed up, along with my motorcycle. Unfortunately, we both had State Farm insurance and they decided to defend the guy that caused the accident, presumably because of the bigger liability, rather than try to make me right. I had an attorney, and we got physical therapy for about 10 weeks on a lien. But PT stopped, not when I was healed, but when the lawyer said he thought it would be difficult to justify more treatment! I thought that was the doctor's decision, but I was wrong.
Along the way, I was examined, poked, prodded, stretched, x-rayed and given an MRI. Despite the visible disc bulge in the area that was creating all the pain, the insurance company said they didn't believe that it was caused by the accident, based on absolutely nothing except that it was an unusual injury. They stopped any further payment. Six years later, my neck and back still hurt everyday, thanks to the asshole that was dialing his cell phone.
The insurance companies act this way because people like your family member are looking for a payday and are willing to commit fraud to get it. Should the victim be treated and the medical bills covered? Of course! Should they make up fake injuries to get more money- only if they want to end up in court. The insurance companies have plenty of lawyers and aren't afraid to use them. Only a fool would commit fraud and take them on.