Insurance Fraud on the Rise: 16 Ways to Avoid Being Scammed

NEWS & TRENDING - INSURANCE NEWS
Stay one step ahead of insurance fraudsters with these prevention strategies.
Updated May 10, 2024
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Insurance fraud is one of the most expensive crimes in the world. Each year, Americans lose billions to insurance scams in industries ranging from auto to healthcare.

However, by taking a few precautions, you can avoid foolish mistakes that land innocent people in scary situations. 

Here are some basic preventive measures you can take to protect yourself against insurance fraud.

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Check incoming email addresses

NicoElNino/Adobe businesswoman sitting at table using computer to read emails on screen

Email scams aren’t just for boomers and the elderly — millennials are 77% more likely than their older counterparts to say they lost money to a scam that started with an email.

Don’t rely on the name or tagline of the email to check if it’s from a reputable source. Instead, check the address itself by hovering over the sender’s name.

The domain should be something like @bcbs.com (Blue Cross Blue Shield) or @uhc.com (United Healthcare), not an unintelligible or deceptive string of letters and numbers.

Get an itemized medical bill

cat027/Adobe pen with stethoscope over medical billing statement at clinic

The best way to avoid fraudulent medical charges is to request an itemized bill from your healthcare provider.

This typically isn’t the first bill they send, so you’ll have to request one from the billing or medical records department.

Check each item and look up its accompanying medical code to make sure you weren’t billed for services you didn’t receive.

Say no to bandit tow trucks

Noel/Adobe red tow truck removing white car from road on a sunny day.

When you’re stranded on the road, the sight of a tow truck may bring a sigh of relief. But if you didn’t call for them, they’re probably not from AAA.

Known as “bandit tow trucks,” these fraudsters tow you to their yard, charge you exorbitant prices for services they’ve already rendered, and threaten to impound your vehicle if you don’t pay.

If you or your insurance company didn’t call for the truck, decline their services.

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Try it

Don’t buy the first policy you find

Urupong/Adobe woman using laptop while working on notepad at wooden table

Shop around for similar policies to determine the industry’s standard price range for the coverage you need. Be suspicious of extremely high and low prices.

Compare the features and advantages of each company and policy. Check online reviews about how well each company treats its customers and pays their claims.

Beware of windshield replacement scams

romaset/Adobe two mechanics changing windshield of car in automobile workshop

Be skeptical if an auto technician tells you you need a replacement if there are no visible signs of damage.

Scammers take your insurance and personal information and submit claim after claim in your name, which will increase your premiums.

Check your employment status

NongAsimo/Adobe man reviewing auto parts while writing customer reviews on paper at table

Some employers avoid paying for worker’s compensation insurance by falsely claiming that their employees are independent contractors. So if you get hurt at work, you’ll be on the hook for the bill.

Check your state’s labor laws and ask your HR department about whether you’re covered by workers’ compensation insurance.

Understand your insurance plan

Natee Meepian/Adobe male real estate agent sitting in front of client explaining contract

Knowing what’s covered can help you avoid outrageous and even fraudulent charges, especially when it comes to out-of-network care.

Bills from healthcare providers that aren’t in your network can be excessive, bordering on fraudulently inflated.

Review the stipulations of your health insurance plan and ask questions to the insurance provider if there’s something you don’t understand.

Get a copy of your policy and review it

Freedomz/Adobe male real estate agent sitting in front of client explaining policies at table

Ask for a copy of your policy as soon as you can. All 50 states have a free-look period, ranging from 10 to 30 days, where you can review your policy and cancel without penalty if you find anything amiss.

Check the credentials of the agent and company

Dilok/Adobe businessman using smartphone to approve a document

Legitimate agents won’t shy away from showing you their license and other credentials, but scammers will. Each state has an online database where you can look up this information.

If you buy a policy from an unregistered or illegal company or agent, you’re unprotected in case of an accident.

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Take photos of your accident

Monkey Business/Adobe african american man taking picture of car after accident with female motorist talking on smartphone in background

If anything goes awry with your insurance claim, photos can provide proof of what happened.

This can prevent your insurance company from minimizing the damage or help you defend yourself against a staged accident, where another person slammed on their brakes or waved you forward to cause the crash.

Check repair receipts

Rido/Adobe couple sitting on couch reviewing receipts to calculate bills at home

Check that your auto mechanic isn’t milking your insurance for additional fixes or services by carefully reviewing your repair bill.

Make sure you only get the repairs you requested and that you’re not pegged with any extra charges.

If your premium goes up as a result of additional claims, you’re the one who gets to pay the additional costs.

Check your credit report

REDPIXEL/Adobe credit score written over paper placed on table with glasses and keyboard

You can get a free copy of your credit report from each of the three credit bureaus (Experian, TransUnion, and Equifax) once a year.

This is more than just your credit score. Your report has a record of every financial and credit account you’ve opened or closed, as well as those that have gone to collections.

Check it for fraudulent activity at least once a year.

Get it in writing

fizkes/Adobe man sitting at table using laptop for work while wearing headset

If an insurance agent agrees to add anything to the policy or guarantees that something is covered, get those commitments in writing.

The company is unlikely to honor any coverage or agreements unless they’re spelled out in black and white and signed at the bottom, regardless of how reasonable your argument sounds.

Don’t sign blank insurance forms

H_Ko/Aadobe businessman wearing suit turning over pages to sign contract at table

It’s tedious and time-consuming, but be sure to fill out all the information yourself when you sign up for any type of insurance.

If you sign a blank form, the agent can put anything they like at the top, and you’ll have no idea what you’ve agreed to.

Verify the identity of incoming callers

Rokas/Adobe scammer calling on smartphone placed on a wooden table

When you’re unsure of whether an incoming call is really from your insurance company, use a reverse phone number website like Spokeo to look it up.

Don’t pick up calls from phone numbers you don’t recognize. If it’s really from your insurance company, they’ll send you a notice in the mail and/or leave you a voicemail.

If you suspect fraud, report it

Chanyanuch/Adobe man selects emotion on virtual screen.

If you’ve been scammed by an insurance agent or company, know that you’re not alone. Americans are defrauded of $308.6 billion every year by dubious insurance companies.

The only way to stop them from harming others like you is to report it. The National Insurance Crime Bureau is in place to help victims of insurance fraud, and you can remain anonymous if you like.

Bottom line

Mila Supinskaya/Adobe businessman sitting at table using laptop for work

Even the most intelligent among us can fall victim to insurance fraud.

And even if you’re not scammed directly, the toll these charlatans take on insurance companies gets passed on to policyholders through higher premiums.

However, by taking some common sense precautions, you can avoid making yourself an easy target for fraudsters and keep more money in your bank account.

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Author Details

Jenni Sisson Jenni Sisson is a freelance writer and editor who focuses on personal finance, real estate, and entrepreneurship. She has been published in Business Insider and The Ways to Wealth. In addition to writing, Jenni hosts the Mama's Money Map podcast to help fellow stay-at-home moms on their journey to financial freedom.

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