What are Insurance Scams: Types and Examples

  • By Steven
  • Published: May 20, 2024
  • Last Updated: Jun 07, 2024


Insurance scams are deceptive activities that allow criminals to manipulate insurance systems to obtain an illegitimate claim. They can come from many sources and appear during the process of underwriting, selling, using, or buying insurance, and can come from many sources. As we’re concerned, insurance scams are those that fraudsters commit against an insurance provider using the authentic details of a patient.

An estimated 20% of insurance claims are fraudulent, resulting in around $308 billion lost to insurance fraudsters in the US every year. Learning about how people become victims of insurance scams, common forms, and the differences that distinguish them can help consumers avoid such schemes.

Insurance Scams

What is Insurance Fraud 

Insurance fraud occurs when deception is used to obtain services or money from an insurance provider; medical, life, property, automotive, and casualty fraud are all types of insurance fraud. Some scammers may justify their crimes by reasoning that insurance fraud is a “victimless crime,” yet this is untrue. Insurance fraud impacts consumers and insurance agencies, and when fraud happens, insurance rates rise.

Further, insurance fraud can occur in many ways; some scammers may submit false credentials on a claim form, hoping to manipulate the insurance provider into giving them lower premiums or a higher payout. Other scammers might create staged incidents, collecting on robberies, arson, or accidents. Fraudulent actors also have various ways to obtain information from their victims (by misuse of insurance forms), including psychological tactics, confusing legal jargon, and falsified records.

Tactics Used by Insurance Scammers

Scammers use various tactics to steal your information. Here they are:

Psychological Tactics 

Some scammers use psychological manipulation to trick consumers into sharing their insurance information. They can create scenarios with a sense of urgency and fear to pretend they need assistance. They might pretend to be overly helpful to the consumer, offering services for little to no costs (to build a long-term rapport). Others could lose their temper and threaten or harass their target into compliance.

No matter how the scammer approaches the conversation, their goal will always be obtaining insurance information. Once the authentic information is obtained, the scammer can submit requests to an insurance provider, robbing their victim without raising alarms.

Misuse of Legal Jargon 

Other scammers may use linguistic tricks to confuse their victims, inflating their language with ridiculous jargon or speaking in circles, pushing their target towards a dependent relationship. The methods in which the scammer achieves this also differ.

Scammers might lure patients to a seemingly official website, only for them to submit information to log in or to fill out a form. Once the patient submits the information, it’s immediately available for the scammers to use without worry that they’ve raised alarms for the patient. Other scammers might impersonate medical officials or representatives of Medicare/Medicaid to encourage sharing personal information with them.

Falsifying Records 

Another class of insurance scammer is those who falsify records for profit. These scammers fabricate documents or deny legitimate claims to undervalue settlements. In insurance fraud, these scammers are prevalent because their claims are relatively challenging to prove or disprove (and just happen to have high rewards).

Scams of this type usually involve injuries but can also include arson, property damage, or other “accidents.” Homeowners and business associates are the demographics most likely to use this scheme, but scammers are increasing in all insurance fraud areas.

Types of Insurance Fraud: A Spectrum of Deceit

There are several types of insurance fraud that you need to know about. Here they are:

Soft vs Hard Fraud

There are countless legal charges for consumer fraud, with insurance scams being classified as opportunistic or “soft” fraud and the second is deliberate or “hard” fraud. Each group has distinctions that raise or lower the punishment for the charge—which is also influenced by local state laws.

Generally, soft fraud is committed by those who inflate or reduce the severity of a claim, garnering additional benefit from a bad scenario. In comparison, hard fraud is committed by those who deliberately cause property damage, intending to collect the insurance policy. Some fraudulent actors receive charges for both despite the increasing likelihood of being caught.

Misappropriation of Premiums 

The spectrum of insurance fraud also includes “premium fraud,” when an insurance official or someone claiming to be a representative embezzles a member’s premium payments. The scammer collects the money from the policyholder and then diverts it to a private account—never sending a claim to the insurance provider.

Seniors are often targeted by premium diversion schemes, as they trust others to be who they say they are. When victimized by these scams, seniors lose more than money—they are also deprived of coverage.

Auto Insurance Fraud

Automotive insurance fraud is a common scam that steals over $7.4 billion annually (including auto theft). These scams can appear in various manners, ranging from staged accidents to falsified repair claims. Moreover, these scams can include scenarios like jumping in front of a moving car (to claim accident retribution from the driver), cutting or restricting the impact of brakes (to claim accident or life insurance from a spouse), or filing requests to pay for damage costs (to divert elsewhere).

Health Insurance Fraud 

Health insurance fraud is another class of insurance scam, which includes schemes like sending fake bills to patients, sending fake claims to insurance companies, sending authentic treatments to illegitimate parties, and causing losses across the board. Even worse, with the rising costs of medical procedures and treatments, patients who fall victim to health insurance fraud are also preyed upon by insurance companies, looking to recoup their legal entitlements.

Life Insurance Fraud 

.  Other types of insurance fraud are life insurance fraud, where insurance fraudsters manipulate life insurance payouts after the unthinkable happens. Some scammers may defraud insurance providers, faking their death as part of a sophisticated, one-chance crime. Other scammers might learn of their associates claiming them as recipients of life insurance, then commit an insurance-related homicide to obtain the benefits.

Property Insurance Fraud 

Homeowners and business property owners are susceptible to property insurance fraud and identity theft. For scammers to obtain enough information to commit property insurance fraud, they are also capable of identity theft—which can be necessary to commit property insurance fraud.

For example, if they are posing as benefit recipients after a property damaging event (i.e., “I’m John Smith, the brother of the owner of the bar that burned down last week. Rob needs some time, so I’m getting the ball rolling with insurance.”) Alternatively, property insurance fraud happens after a staged incident or when the extent of the damage is exaggerated for a bigger payout.

Insurance Frauds Examples: Cases 

Protecting Yourself from an Insurance Scam

Insurance Frauds Examples: Cases 

Knowledge is Power 

Those learning how to protect digital privacy must also learn about their rights under insurance law. By being informed about their rights and available resources, consumers can better protect themselves from scams posed by online threats and some shoddy insurance companies.

For example, learning how to file an insurance claim can help you avoid potential threats while searching for someone to do it for you. Moreover, while it is challenging to read insurance law, becoming familiar with its basic elements will assist in discerning threats online.


Insurance is a primarily written industry, with record-keeping at the forefront of many decisions. Consumers can protect themselves from insurance scams by keeping records of their insurance-related communications and documents. Similar to interacting with government agencies, individuals are most protected when they keep all documents and interactions with the institutions.

Further, if and when the time comes to dispose of these documents, consumers must consider safe disposal methods. These methods should hide or erase personal and medical information from the document. Incineration, fine shredding, and censor stamps are all viable options against dumpster-diving insurance scammers.

Consulting Professionals 

Insurance and legal jargon are challenging to understand, which means scammers can take advantage of those who are unfamiliar with them. However, insurance professionals are always available to assist with complex claims or when they suspect foul play. Consulting with legal professionals is essential to many insurance claims, as only area experts know the secrets to successful determinations.

Additionally, if you suspect you’ve given information to an insurance scammer or are on the road to doing so, a professional can help you avoid the danger. They can provide highly compelling proof of their affiliations, which a scammer can only falsify.

Reporting Scams 

While many scammers come from the depths of the Internet, some take the form of insurance companies. The lack of general knowledge about insurance allows malicious groups to profit from unethical practices like jacking up treatment prices or extorting patients into desired actions.

Insurance institutions operate by the local government’s will; to file a complaint against them, consumers must refer to their state’s Insurance Division of the Department of Business and Industry. They should also consider filing a complaint with the Coalition Against Insurance Fraud.

Insurance is essential to our lives, not day-to-day, but when emergencies happen. The benefits given to a consumer through insurance are significant, ranging from prescription drugs to medical equipment or liquid funds. These member benefits are high-risk targets for scams and fraudulent activities. Scammers have many tactics to obtain member information, and when they are successful, the victim, the insurance company, and all other members of the institution suffer through financial losses and raised rates.

However, by learning about the signs of a possible scammer, how the insurance process works, and the most common types of insurance scams, consumers can recognize and avoid potential online threats (and learn to recognize when they’re done wrong by their insurance provider.

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