Insurance fraud isn’t the most splashy form of crime and it rarely dominates the news cycle. But it does impact your wallet every day.
These numbers might catch your attention: Insurance fraud (non-health insurance) is a $40 billion dollar a year criminal enterprise that costs the average U.S. family between $400 and $700 per year in increased insurance premiums, according to the FBI.
About 75% of insurance industry professionals believe that 10% or more or all insurance claims have some element of fraud, according to the 2020 Friss Insurance Fraud Report, a company that provides fraud and risk detection software to insurance companies.
And some industry professionals believe the number of claims with some element of fraud has nearly doubled since the pandemic.
Industry respondents to the 2020 Friss Insurance Fraud Report survey estimate that 18% of claims contain some element of fraud. The report suggests that the insurance industry’s workplace adjustment to may have contributed to the spike: Remote work resulted in fewer inspections and 75% of respondents reported an increased workload, which may have created gaps in oversight for opportunistic fraudsters to exploit.
For example, due to, an insurance adjuster may not have been able to inspect completed auto repairs, which could create an opportunity for inflated billing.
The top pandemic fraud schemes are staged car accidents, billing scams, phantom services and fake accidents occurring at homes, according to the report.
Fraudsters See More Opportunity For Staged Accidents
Staged accidents are the No. 1 pandemic fraud scheme, according to the 2020 Friss Insurance Fraud Report. A staged accident is typically an event where someone purposely causes a car crash in order to make a fake medical claim against your car insurance policy or their own.
Staged accidents more frequently take place in urban areas and in wealthier communities, according to the National Insurance Crime Bureau (NICB). Criminals also tend to target women driving alone and senior citizens, as they are believed to be less confrontational at an accident scene.
A common staged accident scheme is called the “swoop and squat.” In this scam, two cars are driven by criminals and the third is driven by an innocent victim. The “squat” car pulls in front of the victim’s car and the “swoop” car pulls in front of the squat. The squat car slams on its brakes and the victim cannot react in time, rear-ending the squat car. The swoop car takes off and the occupants of the squat car all make injury claims against your car liability insurance.
Scammers Hope that Inflated Bills Slip Through the Cracks
Scams involving billing and phantom services can take place when a medical professional or mechanic inflates a bill or charges for services that were never actually done.
For example, if you were legitimately hurt in a car accident, an unscrupulous chiropractor might bill your insurance company for treatments you never received. Another example of inflated billing is when a doctor charges multiple times for a treatment that was performed only once.
These types of billing scams can be very hard to detect. You might not closely inspect a doctor’s bill and the insurance claims adjuster could quickly process payment based on good faith for an accident in which you were injured. If a claims adjuster suspects fraud, they might contact you to verify the types of treatment you received.
Another form of billing scam is done by auto body repair shops. In this scheme, you file a car insurance claim for an accident and bring your car to a repair shop. A dishonest shop might use used parts for the repairs but charge for new parts. Or they might overstate the damage to your car and charge more money than necessary for repairs.
Fake Home Injuries
Fake home injury claims are typically staged accidents in which a fraudster claims they were injured on your property and file a claim against your home insurance. Examples include slip and falls (such as falling down a staircase) and dog bite claims.
Old Insurance Scams with a Twist
While much of the world has been adjusting to the pandemic, fraudsters have also tweaked their playbook of scams and added a twist. Scammers look for ways to prey upon our anxieties and provide a false sense of hope. The fraud-fighting community has urged consumers to be on the lookout for insurance scams. Here are a few to be aware of:
Bogus insurance agents. These people claim to be licensed agents and might mimic mainstream insurance companies to sell fraudulent related insurance products. They’re looking to pocket your premium payment for a product that doesn’t exist. Don’t click on any links or engage with an “agent” who’s pitching insurance.
Phishing/spoofing/spam. These are unsolicited emails with a goal to steal your personal information. They might offer related products such as home testing kits.