Insurance Fraud Not Limited to Auto Insurance
*Updated October 1, 2025
Stories about auto insurance fraud and how to handle it if you’re a victim abound, as does advice on everything from how to spot the most common staged accident scenarios to how to deal with insurance companies if you’re run off the road. But the problem of insurance fraud is on the rise throughout the insurance industry, not just within the realm of auto coverage.
Just as Internet scammers once claimed to be collecting money for victims of the earthquake in Haiti, there are as many types of insurance fraud as there are lines of insurance. Insurance fraud occurs across auto, property, travel, health, and even life insurance, and it costs billions of dollars each year.
Fraud Facts: The Scope of Insurance Crime
According to the Coalition Against Insurance Fraud, insurance fraud costs consumers and insurers an estimated 308.6 billion a year in the U.S. This staggering figure includes everything from soft fraud, such as inflating the value of a stolen item, to hard fraud, where organized crime rings stage large schemes like phony car accidents to collect money illegally from insurance companies.
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Soft fraud is a crime that happens when normally honest people often tell “little white lies” on an insurance application—such as false information on an insurance policy to obtain a lower premium.
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Hard fraud occurs when someone deliberately tries to defraud an insurer with a fraudulent claim, such as filing for damages from an accident that never happened.
These fraudulent practices drive higher premiums for everyone, as insurance companies must offset losses by increasing insurance costs across the board.
Types of Insurance Fraud
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Auto Insurance – Staged accidents, false injury reports, and false claims for car damage.
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Property Fraud – Inflating the value of stolen goods or fabricating thefts to obtain insurance compensation.
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Workers’ Compensation Fraud – Filing fraudulent claims for on-the-job injuries that never happened.
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Life Insurance – Falsifying records to secure payouts or hiding key health details omitted in an insurance transaction.
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Health and Medicare/Medicaid Scams – Billing for treatments never performed.
These types of insurance fraud all demonstrate how fraud occurs when someone tries to obtain an illegitimate gain through deception.
The Role of Fraud Units and NICB
Most large insurance companies have special investigative units (fraud units) and cooperate with the National Insurance Crime Bureau (NICB). The NICB works closely with the department of insurance, state insurance departments, and law enforcement in the fight against insurance fraud.
Each fraud division or insurance fraud bureau has jurisdiction over cases where a consumer commits a deliberate deception in an insurance transaction or claim. Fraud is often wrongly thought of as a victimless crime, but in reality it raises insurance premiums and affects all consumers.
Preventing Insurance Fraud
While insurance fraud may never disappear, consumers can take steps to protect themselves:
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Always purchase insurance from a licensed insurance agent or recognized insurance provider. Check with your state insurance department or insurance commissioner for legitimacy.
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Read your insurance policy carefully. Important details may be hidden in fine print.
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Document everything: keep receipts, take photos of belongings, and record accident scenes. This prevents delays if an insurance claim is challenged.
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Report insurance fraud when you see it. A quick call to your state insurance department, fraud unit, or NICB can help investigators.
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Support fraud prevention efforts by staying informed through groups like the Coalition Against Insurance Fraud and the Insurance Information Institute.
Conclusion
The problem of insurance fraud is serious—it can steal millions of dollars from consumers and insurance companies alike, drive up insurance costs, and even involve organized crime. Whether it’s workers’ compensation fraud, property fraud, or deception in life insurance, fraud is committed when someone deliberately tries to obtain a benefit or advantage they’re not entitled to.
Remember: fraud prevention starts with awareness. Stay alert, know your rights, and never hesitate to report insurance fraud if you suspect it. By doing so, you help reduce the impact of this widespread insurance crime on everyone.