Types of Insurance Fraud
- easy way to understand insurance fraud
What is Insurance Fraud?
Soft Fraud vs. Hard Fraud
Insurance fraud occurs when someone
tries to make
money from insurance transactions by deceiving others.
- insurance fraud is usually classified as either hard fraud or soft fraud.
Hard Fraud: Someone deliberately plans an accident, injury, theft, arson or other loss in order to receive money for such loss from an insurance company.
Soft Fraud: Soft fraud is also referred to as opportunistic fraud because unlike hard fraud a policyholder does not plan to deceive an insurance company. A policyholder exaggerates damages thinking it is a “harmless white lie”. But soft fraud is a crime and a felony in Idaho.
Fraud Types by Subjects
The following are actual and most common fraud examples in Idaho, which are sorted by
An individual purchased an auto policy after accident occurred and reported an accident to the insurer with the
wrong date of loss.
An insured was involved in an accident with front bumper damage. Her claim was paid but did not have this damage
repaired. She was involved another accident later and caused additional damages to front bumper. She attempted
to collect monies for prior damages as well.
An insured reported he hit a deer causing damage to his vehicle but damages did not appear consistent with a deer
strike. Also the insured lowered his comprehensive deductible right before the accident.
A claimant was involved in a low impact accident with cosmetic damages to both vehicles. Claimant alleged neck
and back pain and received treatment.
Claimant alleged that a driver struck his vehicle in a parking lot. However, since the damages did not match the
impact and had rust in metal, the insurance company determined that damages of the claimant vehicle were
pre-existing prior to this accident.
Insured placed the motorcycle in the back of his pickup truck and gone to a rural road. While his partner drove the
truck at 40–50 miles per hour, insured pushed the motorcycle out of the truck and onto the road. Insured subsequently
had his partner drag him down the road behind the truck in order to make his clothing look like it had been damaged
in a motorcycle accident.
An uninsured teenage girl hit another car. Her older sister who has auto insurance told the police that she
caused the accident.
Insured obtained a policy on a 2007 Jaguar stating he paid $100,000 for it, however, he actually paid for $34,000.
A few days before the policy expiration, he reported the car was a total loss due to vehicle fire.
A customer alleged she tripped and fell due to something black or the greasy spot on the floor and submitted a
claim for her injury. Video shows the floor was clean and appears she tripped on her own feet or flip-flops.
A customer alleged she poured a cup of coffee and after drinking much of the cup she discovered a used dirty
cotton swap in the paper cup. Investigator’s experiments revealed if there was a swab in the cup it would be
very visible and obvious as it floats to the top.
Slip & Fall
A customer slipped and fell by the swimming pool and told he could not feel his legs. He also contended he
hit his head and lower back, however, the security video shows no indication to prove his story.
After neck and back surgeries, an insured started taking prescribed pain medicine, which did not help as much
as she wanted. So she visited another doctor to get the same medicine, which did not last long. She again visited
another doctor to get the same medicine.
Claimants submitted medical bills that appeared to be altered. Provider’s records show no service for those
claimants on the date that were stated on the bills submitted.
An applicant did not disclose a serious preexisting condition on health insurance application form.
Prescription Related Fraud
#1 A consumer stole a prescription pad from the former employer and obtained narcotics.
#2 An Insured’s daughter called in a refill for her mother’s prescription and picked up. However, she did
not give the prescription to her mother.
#3 An Insured received RX from doctor and wrote additional medications on the RX in order to receive narcotics.
Insured hired a family friend to burn down his parents’ home promising him a pick-up truck and $12,000 from the
insurance proceeds. Insured hoped that by burning down the house, his parents could submit an insurance claim for
fire damage, allowing them to avoid further mortgage payments on their house.
An insured had a claim for wind storm damages and was paid for but did not fix the damages. Two years later
after having changed an insurance company the insured submitted a claim for the same damages to the new insurance
An insured claimed she was hit from the back and forced off the road and the engine got fire. Investigations
revealed the damages to the rear bumper were preexisting and the cause of fire was from the engine failure.
An insured claimed the loss of his ring. Investigation found the ring at the pawn shop.
An insured inflated the value of stereo equipment, computer and home theater systems stolen during a robbery
and added items not reported to the police such as jewelries, fur coat, and Gucci bags.
Injury Not Related Work
After terminated from work due to the failed drug screening, an employee reported he injured his back
at work. The video footage showed no oddities. All the witnesses were consistent stating he told them he
injured his back while helping his friends prior to his termination.
An employer filed a claim for an employee’s injury. However, medical records indicate the employee had
symptoms of claimed CTS injury prior to his hire date with the employer.
Working or being active while receiving WC benefit
#1 A claimant was videotaped as he was competing in tennis tournaments while receiving disability with
medical restrictions including avoiding prolonged rotation of the neck, refraining from constant sitting
or standing with no repetitive/strenuous use of hands.
#2 A claimant worked on neighbors’ houses for money while collecting WC benefit for an injury at work.
Failure to obtain coverage
Idaho State law requires most employers to have workers’ compensation insurance.
An employer reported fewer numbers of employees.
An employer reported incorrect business type to avoid higher premiums.
An employer reported incorrect classifications of employees to avoid higher premiums.
Rebating is paying premiums, forgiving loans or offering cash payments as an inducement to purchase a policy §41-1314
An agent encouraged some high net-worth clients to apply for high face-value life insurance policies with the
promise of rebating all or part of the first-year premiums back to the customer. This becomes possible because the
agent received commission payments from the insurance carriers of approximately 105 to 138% of the first-year premium.
The agent kept the reminder.
STOLI (Stranger Originated Life Insurance)
STOLI is a life insurance policy whose beneficiary is a totally stranger to the insured.
An agent offered a consumer “free” insurance and a $350,000 immediate cash payment if he would agree to apply
for a $4,000,000 life policy on himself and transfer it over to investors after two years.
Cross Border Sales
An agent sold a final expense product that is not approved in Washington to Washington residents.
An agent had taken cash premium payments and spent the money for his personal use.
An agent backdated the coverage in order to an applicant to avoid penalties of tickets issued for driving
An agent reinstated the lapsed life insurance by forging the insured’s signature on the application
without the insured knowledge.
An agent added a renter’s policy to an existing auto policy without knowledge of the insured so that he
could meet the company’s requirement. Then he deleted the renter’s policy the next day.
An agent issued a policy for a person who had been deceased for several years and forged signatures on application.
#1 An agent signed up a customer as his employee so that he could give a group rate.
#2 An agent created a fictitious company and gave her family and friends group discount.
An agent wrote an annuity application for an elderly individual and listed himself as the primary
beneficiary pretending he was this individual’s son.
A solicitor for a chiropractor’s office had called people who had been involved in an auto accident and
referred them to get treatment at this chiropractor’s office. The solicitor scheduled appointments for a
free first visit and then submitted a claim to an insurance company.
Doctor used massage therapists to treat his patients and billed the services under his performing provider
number as manual therapy techniques, which is covered. However, massage therapists are non-covered providers
with this insurance company.
Billed for services not provided
#1 Out-of Network doctor provided services to Medicare Advantage patients, which requires pre-authorization.
When the services were denied, the same services were reported by In-Network doctor.
#2 Chiropractor billed for treating lower back although an insured never suffered from any lower back pain.
Return to Investigations Menu
Fake insurance company or agency
A fake insurance company offered a policy at costs that were significantly low. It
collected premiums for bogus policies with no intention of paying claims.
#1 A legitimate company that is not licensed in Idaho sold insurance to a consumer resides in Idaho. It is
selling a legitimate “insurance evading state insurance regulations.
#2 A company who sells a health discount plan might call their plan “insurance” but it is really an
unregulated, non-insurance product.