How to Avoid the 5 Most Common Insurance Scams

Virginia Brown
Virginia Brown

Fast facts – the five most common insurance scams:

  • Inflating car insurance claims with fake injuries and damage.
  • Targeted attacks on Medicare recipients.
  • NEW: COVID-19 relief scams (over $60 million dollars in personal fraud reported so far).
  • Fraudulent workers’ compensation claims.
  • Home contractor scams against home owners.

Insurance fraud is one of America’s largest crimes. The FBI estimates that the cost of insurance fraud (minus health insurance) is more than $40 billion per year, and according to the Coalition Against Insurance Fraud, at least double that amount is stolen each year across all facets of the insurance industry; and that’s a conservative figure, since much insurance fraud goes undetected.

Insurance scammers prey on victims in every category of income, age, education, ethnic background, and location. They take advantage of consumers’ fears, especially during times of crisis, like a global pandemic. 

“A big misconception is that insurance fraud is a victimless crime or harmless prank,” said James Quiggle with the Coalition Against Insurance Fraud. “The costs of fraud are passed onto all consumers in higher premiums.” Here are some of the most common forms of insurance fraud and how you can protect yourself. 

Auto insurance fraud

Car insurance fraud ranges from misrepresenting facts on insurance applications and inflating insurance claims to submitting claim forms for bogus injuries or damage, and much more. There are also several different types of staged car accidents that scammers will use to try to swindle your insurance or their own insurance company out of money. 

There are a few ways to protect yourself from these scams. For starters, never tailgate. Allowing enough distance between you and the cars ahead will give you enough time to brake should the car in front of you suddenly stop. If you are involved in a collision, however, be sure to count how many passengers were in the other car. 

[ Read: The Best Car Insurance Companies for 2020 ]

Take down names, phone numbers and driver’s license information. Sometimes more people than were actually in the car will try to file claims. Take cell-phone pictures of the other car, the damage it received — and the passengers.

Scammers today may use the excuse of spreading COVID-19 as a reason not to involve the police. Do not fall for this, as it only provides the scammer with the opportunity to file false insurance claims. Call the police to the scene. Get a police report with the officer’s name, even if it’s just minor damage. 

Medicare scams

Medicare recipients, take note. Scammers are out there targeting you, specifically as it pertains to your Medicare number and card. In April, the Centers for Medicare & Medicaid Services began sending out new cards to Medicare beneficiaries. These cards are meant to be more secure, yes, but do not come with a fee. Anyone who contacts you claiming to represent Medicare and trying to charge you for your card is trying to scam you.

Do not provide your social security number, bank or credit information, or wire cash to anyone who tells you that you must pay to receive your card. In general, never give out your Medicare number to anyone you don’t know or didn’t contact first. And never let strangers help you complete applications or forms that include personal information. Always consult a trusted family member or friend.

Always remember, you have the right to hang up or delete messages that seem off or make you feel uncomfortable. If you do receive a suspicious call, contact the Medicare office (1-800-MEDICARE). And if for any reason, you receive a new Medicare card, be sure to shred your old one before you toss it. 

COVID-19 scams

Since January 1, the Federal Trade Commission has received over 90,000 COVID-19-related reports involving online shopping and travel-related scams. The online shopping reports typically consist of ordering products that never arrive, while most of the travel and vacation reports relate to refunds and cancellations. 

The Coalition Against Insurance Fraud warns consumers to be on the lookout for fake travel insurance policies that claim to cover COVID-19-related cancellations. Keep in mind that most travel insurance policies do not cover pandemics, so if someone tries to sell you travel insurance that specifically covers COVID-19 issues, that’s a red flag. 

So far, people have reported losing $59.27 million on these and other COVID-related fraud reports. Check the FTC’s state-specific data on pandemic-related issues. This resource allows you to search by your state to see what people near you have been reporting. Then check this comprehensive list of advice on how to prevent yourself from becoming a victim to a coronavirus scam. 

Workers compensation and medical fraud

Workers compensation insurance protects employees if they’re hurt on the job. Only a small number of scammers work this system, but their damage is huge. Tens of billions of dollars in false claims and unpaid premiums are stolen annually.

Employers who misrepresent their payroll or the type of work carried out by their workers to ensure lower premiums are committing workers compensation fraud. 

On a related note, fraud in the medical field includes “upcoding,” when health providers exaggerate treatment provided to injured workers or bill for procedures that were never performed. “Consumers should stay alert to the warning signs of a scam,” Quiggle says. “Pay close attention to your medical bills to make sure you’re charged for procedures and treatments you actually had.”

Home contractor fraud

That harmless knock on the door could be a bogus contractor. If a contractor approaches your home and says he has materials left over from a previous job, it could be a scam. Also keep in mind that contractors who only accept cash, ask you to pay everything up front, or suggest that you borrow money from one of their lenders, is likely a home contractor scam

Before you agree to any contractors’ work, the FTC suggests a number of precautions in order to avoid fraud, including getting a written contract, keeping detailed records, and not making a final payment until you are completely satisfied with the work. In short, Quiggle says, “Have a signed contract and never give a contractor the full payment in advance.”

The bottom line

Fraud is big business, and one that affects us all. Medicare, auto, workers compensation, home contractor, and COVID-related fraud run rampant, but they’re unfortunately just the tip of a fraudulent iceberg. The Coalition Against Insurance Fraud provides a detailed list of the many other types of fraud. 

Never give out personal information to strangers or those you don’t trust, and beware of cold calls or knocks on your door from those offering unsolicited services. With these tips, you’ll help ensure that you’re not a target or a victim. And remember: most insurance fraud goes undetected or unreported, so if you suspect fraudulent activities, contact the National Insurance Crime Bureau or submit a form online.