INSURANCE FRAUD: WHAT IS
IT AND HOW DO I REPORT IT?
Each year, insurance fraud costs companies and consumers
alike tens of billions of dollars. In order to better
identify and reduce incidents of insurance fraud — and, most
important, protect consumers — the National Association of
Insurance Commissioners (NAIC) offers the following tips for
identifying and responding to insurance fraud.
What Is Insurance Fraud?
Insurance fraud occurs when an insurance company, agent,
adjuster or consumer commits a deliberate deception in order
to obtain an illegitimate gain. It can occur during the
process of buying, using, selling or underwriting insurance.
What Types of Insurance Fraud Are There?
Fake insurance companies defraud consumers by collecting
premiums for bogus policies with no intention of paying
claims. These “companies” might offer policies at costs that
are significantly lower than competitors’ prices or they
might be difficult to reach by phone — if there is a listed
phone number at all. Consumers should check in advance that
they are dealing with a legitimate, licensed insurer before
signing an application for a policy. Your state insurance
department can provide licensing information for a company
or agent. For a link to your state insurance department Web
site, go to
Legitimate companies that are not licensed by the state to
sell insurance might lead consumers to think they are
selling “insurance” while evading state insurance
regulations. A company selling a health discount plan might
call the plan insurance when it is really an unregulated,
non-insurance product. If you question whether a product you
are offered is insurance, contact your state insurance
Individuals within the insurance industry have also deceived
consumers for personal gain. For example, an unscrupulous
insurance agent might collect premiums from a customer
without passing them along to the company. The consumer
believes that their premiums are being properly handled
while the insurance company thinks the policyholder is not
paying their premiums and, therefore, cancels or nonrenews
the consumer's policy. If you do not receive an insurance ID
card or a copy of your policy in a timely manner, this could
be an indication that your premiums have not been paid to
your insurance company. If you have questions or concerns,
contact your insurance company directly or call your state
Consumers can also be guilty of insurance fraud. Deliberate
attempts to stage an accident, injury, theft, arson or other
type of loss that would be covered under an insurance
policy; exaggerating a legitimate claim; and/or knowingly
omitting or providing false information on an application
for a policy are all examples of consumer insurance fraud.
How do I report a suspected incident of Insurance Fraud?
If you believe that you have been a victim of insurance
fraud, or if you are aware of an instance of insurance
fraud, it is important to
Contact your state
insurance department to file a complaint against the
insurance company; and/or
Visit www.naic.org and
complete the form provided by the Online Fraud Reporting
System (OFRS). Through the OFRS, the NAIC and state
regulators are encouraging consumers to take a proactive
role in identifying and reporting insurance fraud. Not
only does this minimize future instances of insurance
fraud, but it also reduces unnecessary insurance costs.
Who Responds to Insurance
Most states have special fraud bureaus — frequently housed
within the department of insurance — to address the growing
problem of insurance fraud. These bureaus take referrals and
investigate cases regarding insurance fraud from various
sources, such as law enforcement agencies, insurance
companies and consumer complaints.
State insurance departments have recently sought to enhance
their collection of information from consumers, insurance
producers and employees of insurers concerning alleged
violations of insurance laws and regulations. Consumers can
contact their state insurance department if they have
questions regarding possible fraudulent activity.
Stop. Call. Confirm.
If you are unsure about the insurance company or agent you
are dealing with, STOP before signing any paperwork or
writing a check; CALL your state insurance department —
easily reached by phone; and CONFIRM the company or agent
offering insurance is legitimate and licensed in the state.
For more information about auto, home, life and health
insurance options, as well as tips for choosing the coverage
that is right for you and your family, visit