Insurance Scam Awareness: Fraudulent Policies and Claims

Security Education: This article describes cyber threats for defensive awareness and education purposes only. Understanding how attacks work helps organizations and individuals protect themselves. Never use this information for unauthorized access or malicious purposes.

Insurance scams target consumers through fake policies that provide no coverage, fraudulent agents who pocket premiums, and phishing schemes that steal personal information under the guise of insurance applications. The Coalition Against Insurance Fraud estimates that insurance fraud costs American consumers over $308 billion annually, adding $400 to $700 to the average family’s annual premiums.

Types of Insurance Scams Targeting Consumers

Fake health insurance plans proliferate during open enrollment and especially after the Affordable Care Act increased demand. Scammers sell “health insurance” that is actually a discount card or limited-benefit plan with caps so low they provide no meaningful coverage. Victims discover the fraud when they need medical care and find their “insurance” covers nothing.

Ghost broker scams involve unlicensed individuals selling what appears to be legitimate car insurance from real companies at steep discounts. The ghost broker may purchase a real policy, then cancel it after providing you proof of coverage, or forge insurance documents entirely. You drive believing you are insured until you are in an accident or pulled over and discover your policy does not exist.

Phishing through fake insurance communications. Emails and texts claiming to be from your insurance company request policy verification, payment updates, or claims information. The links lead to credential-harvesting sites that capture your login, personal information, and payment details.

Storm chaser and disaster scams. After natural disasters, unscrupulous contractors or fake adjusters approach homeowners claiming to expedite insurance claims. They collect upfront fees, inflate damage estimates to pocket the difference, or simply disappear with advance payments.

Verification Steps

Verify agent licensing. Every state maintains a database of licensed insurance agents. Check your state’s Department of Insurance website before purchasing from any agent or broker. An unlicensed seller is operating illegally.

Verify the insurance company. Confirm the company is authorized to sell insurance in your state through your state’s Department of Insurance. Check the company’s rating with AM Best, Moody’s, or Standard & Poor’s.

Be wary of significantly discounted premiums. If a quote is dramatically lower than competitors, the “coverage” may be fraudulent or illusory.

Contact your insurer directly if you receive any communication requesting personal information or payment changes. Use the phone number on your insurance card or the company’s official website, not the contact information in the suspicious message.

For more on how scammers impersonate legitimate businesses, see our brand impersonation phishing guide. To understand phishing techniques used in insurance scams, explore our recognizing phishing emails guide.

After a Natural Disaster

Natural disasters create a perfect environment for insurance scams. Homeowners are stressed, dealing with damage, and eager for help. Scammers posing as adjusters, contractors, or insurance representatives exploit this vulnerability.

Never sign an Assignment of Benefits (AOB) without fully understanding what you are authorizing. An AOB transfers your insurance claim rights to a third party (usually a contractor), who then deals directly with your insurance company. While sometimes legitimate, AOBs have been widely abused, with contractors inflating claims and homeowners losing control of their claim process.

After a disaster, contact your insurance company directly using the number on your insurance card or their official website. Your insurer will assign a legitimate adjuster. Be skeptical of anyone who appears at your door unsolicited offering to help with your insurance claim, especially if they ask for upfront payment or pressure you to sign documents immediately. Document all damage with photos and videos before any cleanup or temporary repairs, and keep all receipts for emergency expenses.

Verifying Claims After an Incident

After any insurance-related interaction that feels suspicious, contact your insurance company directly using the number printed on your insurance card. Ask about any policy changes, claims filed, or communications sent. Keep a log of all insurance-related contacts including dates, names, and reference numbers. This documentation is invaluable if you need to prove fraud occurred.