blocks that spell out scam

Insurance Scams to Watch For

Insurance scams are a billion-dollar problem

According to the Federal Bureau of Investigation,1 insurance scams are estimated to cost more than $40 billion per year. That means insurance fraud costs the average U.S. family between $400 and $700 per year in the form of increased premiums because insurance companies need to cover their losses from fraud. 

Every day scammers try to take advantage of the unsuspecting and vulnerable through insurance scams. Don’t fall victim to their attempts. Learning to identify signs of fraudulent activity can help protect you and your loved ones.

Health insurance scams

Getting the right health insurance for your family’s needs can be confusing given the vast amounts of coverage and cost options. Shady criminals like to take advantage of that confusion to sell you health insurance and health services that don’t deliver what was promised if they deliver at all. Check out the types of health insurance scams below so you can know what to look out for before it happens to you.

Medical billing fraud

Medical billing fraud is a common type of health insurance scam. Medical bills are full of codes and medical jargon that many people have trouble understanding, which creates opportunities for unethical medical professionals to slip in some fraudulent charges. A few examples of medical billing fraud include:

– Services billed for by your medical provider that never happened.

– Bills that claim you owe money for services that your insurance already paid.

– “Upcoding,” meaning you were provided a service but were billed for a higher level of the same service. For example, you might only have a cold, but the doctor billed for pneumonia.

When you go shopping, a common practice is to look at your receipt after a purchase to make sure you were charged for the correct item and make sure the cashier didn’t accidentally charge you twice for the same thing. This same practice can be applied to your medical bills to avoid health insurance scams. 

After you visit a medical provider, your insurance company sends you a kind of receipt called an EOB or explanation of benefits. The EOB explains the services billed for by your medical provider, the coverage based on the benefits in your health insurance policy, and how your medical bill’s costs will be split between you and your insurer. 

It’s essential to go through your EOB and make sure you and the insurance company are billed for the right services and that the insurance company covered

what they were supposed to. If you have any questions about your EOB, call your insurance company. 

You can also ask your medical service provider for an itemized list of services they billed for and compare it with your EOB. If you suspect fraudulent billing, try to sort the bill out with the doctor or hospital’s billing department. It may have been an honest mistake. If they refuse to correct the charges, call your insurance company and report it. 

Medicare fraud

Medicare fraud is a massive health insurance scam and results2 in higher health care costs and taxes for everyone, which is why you should guard your Medicare card like it’s a credit card. Scammers might call you or send convincing emails asking for personal information or claim you have to pay a fee to renew your Medicare card. Remember:

  • Medicare will never contact you for your Medicare Number or other personal information unless you’ve given them permission in advance.
  • Medicare will never call you to sell you anything.
  • You may get calls from people promising you things if you give them a Medicare Number. Please don’t do it.
  • Medicare will never visit you at your home.
  • Medicare can’t enroll you over the phone unless you called first.

If you have questions about whether a call or email was legitimate, call 1-800-MEDICARE or the number on the back of your card to find out.

Auto insurance scams

Auto insurance scams are just another way scammer’s try to take advantage of people like you. Getting recommendations for auto repair shops and documenting details of an auto accident in detail are a couple of ways to prevent you from falling victim to an auto insurance scam. Read on to find out more!

Fraudulent car repairs

Chances are you have heard of someone getting ripped off by an auto repair shop. It’s common for auto insurance scams to occur because cars require regular maintenance and repairs, leading to regular opportunities for scammers to take advantage of consumers. Learning about your vehicle, shopping for estimates, and getting recommendations are ways to help you find a reliable auto shop for your car needs.

Learn about your car

Learning about your car, what it needs, and what it doesn’t need can help save you money in the future. For example, what kind of air filter does your car take? What type of oil? How about tires? The more you know about the work that needs to be completed, the less chance you’ll have of being a victim. If you know your car runs fine on regular oil, then you won’t fall victim to a salesperson telling you your

vehicle needs synthetic oil, a more expensive oil. 

Estimate vs. Final Cost

If you need work done on your car, always ask for a cost estimate. That way, you get an idea of how much the job might cost you and compare it with what your insurance will cover. It’s also a good idea to get a couple of estimates so you can compare and find the best price. If your calculations vary significantly, you know something is off. 

Many states also have laws limiting how much more the final cost can be than the original estimate, so check to see if your state is one of those! For example, Illinois’ Automotive Repair Act3 states that a final bill must not exceed the estimate by more than 10%, or the final bill must not exceed the estimate without the owner’s consent. That way, you aren’t told the work will only cost $1,000 but are given a bill for $5,000 once the work is completed. 

Ask for recommendations

Asking friends, family, co-workers, and neighbors is a straightforward and commonsense approach to avoiding auto insurance scams and finding a reliable auto shop. Going to a repair shop with a documented history of quality service by someone you know is better than choosing a shop based on what could be fake reviews online. You can also call your car insurance company and ask for approved or recommended providers in your area.

Staged accidents

Scammers out there take time to lure you and your auto insurance into danger by purposefully creating accidents and then blaming the innocent driver. The scammer plays the victim and cashes out on your auto insurance policy by claiming extensive damage or injury. 

A popular auto insurance scam is known as “the drive down,”4 and anyone trying to merge into traffic is a potential victim. The scammer signals to the victim that it’s okay to merge in front of him. Instead of slowing down, the scammer will speed up and crash into the victim’s car and then claim that he never waved or signaled the driver to merge in front of him. 

The best way to avoid a staged accident is by staying alert, being aware of your surroundings, and abiding by all laws. 

Ghost Brokers

A ghost broker is someone you think applies for a policy in your name, might actually do so, but then keeps your premium payments and cancels the policy shortly after — all without your knowledge. This practice allows the fraudsters to deceive unsuspecting “customers” into thinking they have a legitimate policy. The victim may only find out that the policy was canceled after they filed a claim with

an insurance company they believe they have a policy with. 

According to the National Association of Insurance Commissioners,5 ghost brokers typically advertise cheap insurance on social media sites or messaging apps that are much cheaper than competitors’ policies. Signs of a potential ghost broker


  • Agents who advertise cheap insurance on social media sites or messaging apps.
  • Agents that can only be reached through social media or email.
  • Agents that only accept cash payments in person or through cash-transfer mobile apps

You should call your state’s insurance department6 to confirm that the agent is licensed to sell insurance in your state before signing any paperwork or making any payments. And if an insurance rate seems too good to be true, it probably is.

Life insurance scams

Insurance agents have been caught7 fraudulently overstating a customer’s net worth on a life insurance application so that they qualify for a larger policy than they need — and the agent scores a bigger commission. Unfortunately, the policy may also be bigger than the customer can afford, leaving them with no choice later but to drop the policy and lose their coverage. 

You can avoid this insurance scam by making sure you get a copy of your insurance application and reading it carefully for inaccuracies.

Other life insurance scams are harder to detect, which is why it is essential to ask questions. If you are working with an agent for the first time, you should look them up on your state insurance department’s website8 to make sure they are licensed to sell insurance in your state. You can also check to see if any complaints have been filed against them. 

If you see something, say something

If you or a loved one has been the victim or a potential victim of an insurance scam, you need to report it. Even if you were able to identify and prevent the fraud from happening, it is crucial to report the perpetrator to make sure they can’t take  advantage of someone else. Make sure to include as much information as you can about the insurance scam in your report, including:

  • Full details of the suspected scam.
  • Dates, names, phone numbers, emails, and URLs of suspected individuals and organizations.
  • Insurance companies that were defrauded – or did the defrauding.
  • Amount of money you believe was lost.
  • Records and other evidence.
  • Other information you think is helpful.

More information on insurance fraud and how to report it

National Insurance Crime Bureau (NICB)9

The NICB is an intelligence-driven and operationally focused non-profit organization that leads a united effort of insurers, law enforcement agencies, and public representatives to identify, combat, and prevent insurance crime. 

If you suspect fraud activities, you can contact NICB by calling 1-800-TEL-NICB by filling out a form on their website. All tips can remain anonymous.

The Federal Trade Commission10

The FTC houses the government’s website where you can report fraud, scams, and bad business practices.

The Federal Bureau of Investigations11

The FBI is a federal investigative and intelligence agency with jurisdiction in a wide range of federal crimes. You can contact your local FBI office or submit a tip electronically if you have information about financial crimes that involve fraud.

Coalition Against Insurance Fraud (CAIF)12

CAIF is an alliance of more than 230 member organizations united against insurance fraud. Consumers, insurers, government agencies, legislators, prosecutors, and other committed partners come together under the Coalition banner to fight all forms of insurance scams regardless of whom commits the


National Association of Insurance Commissioners (NAIC)13

The NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight.