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Here are several prominent insurance schemes and fraud trends. Most of these schemes persist year after year, though with some variations. Others, such as diversion of prescription narcotics, have spread rapidly in the last several years.

Fake health plans Workers compensation
Vehicle giveups Senior fraud
Home arsons Airbag fraud
Personal possessions Windshield fraud
Workers comp: premium scams Tainted-food shakedowns
Workers comp: injury claims Fake slip-and-fall injuries
Staged auto crashes Scams by PEOs
Agent scams Fake business liability coverage
Diversion of prescription narcotics Fake death for life insurance
Auto premium evasion Street racing
Body shop scams Medical discount plans
Owner vehicle giveups Dental fraud
Fake hate scams Medicare discount prescriptions


The economy

With America's economy in a continued downturn, anxious consumers and businesses may use insurance schemes to try to bail themselves out of financial distress. Many forms of insurance fraud have increased in the down economy, according to a Coalition survey of state fraud bureau directors.

Here's a brief look at several fraud trends and potential trends:

• Fake health plans. Con artists are selling bogus health insurance to consumers who are seeking affordable protection in a downturned economy. Typically the swindlers market full-benefit coverage. But they actually deliver worthless pieces of paper, stripped-down policies that offer little protection, or discount medical plans. Bogus plans have operated in most states, and the majority of state insurance departments have been forced to take action since 2008. More con artists also tried to sell non-existent "Obamacare" policies after health reform passed in March 2010. Typically they tried to sell "official" policies called "Obamacare" insurance. The swindlers often went door to door. They lied they were federal officials and that health reform required consumers to buy the coverage during a limited-enrollment period.

Vehicle giveups. Anxious drivers in growing numbers are dumping unwanted vehicles for insurance money. Typically, the drivers torch the vehicle, sink it in a lake or river or simply abandon it. Vehicles also are being sold to chop shops or gangs that sell the vehicles overseas. The drivers then lie to their insurance company that someone stole the vehicle. Insurance, fire and law enforcement officials in nearly a dozen locales around the U.S. say that so-called "vehicle giveups" are spiking or show clear warning signs of spiking. More jurisdictions may face similar problems. Giveups appear to be the clearest economy-driven insurance-fraud trend. Falling gas prices may ease some pressure on drivers, but broader financial distress may keep this trend active and ongoing.

Home arsons. Some homeowners facing foreclosure have been arrested for allegedly torching their homes, hoping an insurance payout will save their homes. The numbers appear relatively small and the trend anecdotal compared to vehicle giveups. Still, cases continue to be reported around the U.S.

Personal possessions. More consumers are making suspicious claims for expensive possessions that were mysteriously "stolen" or "lost." This could include jewelry, home electronics or other goods. Numerous fraud investigators report suspicious losses have increased recently.

Workers comp: premium scams. Hard-pressed businesses may try to illegally avoid paying full workers comp premiums. Companies hide workers in shell companies to reduce their payroll and staff size. They also misclassify workers in high-risk jobs as having low-risk jobs (e.g., roofers misclassified as clerks). As a result, vulnerable workers often Hispanics in the underground economy don't have vital comp coverage. Such schemes appeared to be spreading before the recession, especially in construction. Fraud investigators are watching for signs of an economy-driven spike, but the data don't yet exist to confirm if the recession has intensified the spike.

Workers comp: injury claims. Investigators are watching for possible spikes in bogus injury claims by employees, especially in light of increased layoffs. No national or data exists, however, to confirm whether claims have spiked.


Staged auto crashes

Drivers maneuver innocent motorists into low-speed crashes, often making it seem the motorists are at fault. In many cases, the con's car is packed with so-called passengers who are part of the scam. The passengers claim they received painful (and fake) back and neck injuries that require expensive treatment from a chiropractor or physical therapist who's part of the scam. The shady medical provider files thousands of dollars with the motorist's insurance company for useless or even phantom treatment. Increasingly, the crashes never happen at allthe cash and ensuing treatment are fabricated. The largest concentrations of staged accidents are in urban areas. The high traffic volume makes large numbers of injury claims more plausible and recruits for the scams are more-easily available.

Organized gangs: Organized gangs involving recruiters, car "passengers," doctors, medical clinics, lawyers are involved in many of the largest staged-accident crimes. The gangs lure motorists into crashes, crash their own cars into each other, or invent "paper" accidents that never happened in order to make large volumes of bogus injury claims. These rings are widespread in several areas of the US, and often involve immigrants as street-level operatives. Many states have passed laws and regulations targeting staged-accident rings, and some have formed taskforces, hired special prosecutors and deployed other resources to shutting down the rings.


Agent scams

Most insurance agents are honest and ethical, but a growing number of agents are bilking their customers. Dishonest agents steal their customers' premiums, but not buy the requested policies. They cover up the thefts by issuing fake policies or other evidence of coverage. Customers often discover the scam only when they make a claim and the insurer says there's no coverage. Dishonest agents also will secretly slip unwanted coverage into a policy to boost their own commissions. They may also convince policyholders especially seniors to cash out their life policies and buy a new policy with no accumulated value.

Diversion of prescription narcotics

Physicians, pharmacists, doctor-shopping patients, drug traffickers and others are diverting large volumes of addictive prescription drugs such as OxyContin and Vicodin for street resale and personal use. The prescriptions typically are billed to insurers. The prescriptions are forged, sometimes using fake patients and stolen identities. Some swindles are done by individuals, and some by organized rings. Diversion of narcotics coincides both with the emergence of pain management as a medical specialty, and with an explosion of street demand for addictive prescription painkillers, muscle relaxants and other addictive prescription drugs. Aside from the stolen insurance money, drug diversion fuels rising addiction and overdose deaths from prescription narcotics.

Auto premium evasion

Drivers fraudulently reduce their auto premiums by registering their vehicles in another state or county where premiums are lower. They may take out a P.O. box, or register their vehicle at the address of a relative or friend, lying to their auto insurer that this is their primary residence. This trend is especially notable in several East Coast states such as North Carolina, Pennsylvania, Massachusetts, New York, New Jersey, Florida and Maryland. Premium scams can unfairly help raise premiums for drivers in the lower-priced locales. If New York driver who's fraudulently registered in Pennsylvania has a crash in New York, the insurer will calculate the crash into premiums for the state where the vehicle was fraudulently registered. There are other forms of rate evasion, such as failing to place a teen driver on your auto policy; using counterfeit documents to obtain a driver license without buying auto coverage; and making a minimum down payment to buy coverage and get vehicle registration, then allowing the policy to cancel for nonpayment.

Body shop scams

Body shops are generally honest, but some bilk their customers. They'll perform shoddy repairs, use old or unsafe parts, further damage a car to inflate bills, and bill insurers for work they never perform. This can leave drivers with vehicles that are unsafe, and require considerable time and effort to re-fix the original repairs.

Owner vehicle giveups

Anxious to avoid unwanted monthly payments, some owners will dump their vehicles then tell the insurer that it has been stolen. Owners often will torch the vehicle in a remote locale, or simply abandon it in the woods or a vacant lot. Sinking an vehicle in a lake, canal or river is another approach. Vehicle owners might dump their vehicle when they suffer financial setbacks such as a job loss, weakening economy or spike in gas prices. Long-term car loans also provide an incentive for people to dump their cars because after a few years the balance on the loan is more than the value of the car.

Fake hate scams

Home or business owners will torch their dwellings or stage a burglary for insurance money, but disguise the crime as a racial, religious or other hate crime. They might spray-paint racial insults on the interior walls, for example. Initially, the crimes often generate outpourings of community support and sympathy for the apparent victims, with considerable news coverage.

Workers compensation

• Premium scams. Businesses illegally reduce their premiums by underreporting the number of employees or size of their payroll to their workers comp insurer. They also might lie that employees work safer jobs than they really do. A building firm, for example, might say many of its roofers are clerks or sales staff. Premiums scams often are concealed through double bookkeeping, hiding of employees in shell corporations, and cash wage payments under the table. These frauds can reduce a firm's premiums hundreds ofthousands of dollars a year. The premium savings let dishonest firms underbid honest competitors for contracts. These scams often are found in the construction industry, with its high-risk jobs.

• Fake injury claims. An employee inflates or fabricates a job-related injury to collect workers compensation money. Often the employee will receive insurance money while secretly working side jobs they're supposedly medically unable to perform. These claims exploit the no-fault workers compensation system required in most states. Injured workers typically can receive 100 percent payment of medical bills, plus up to two thirds of wages. No exact figures exist for how many bogus claims are made annually, or how much insurance money fraudulent injury claims steal each year.

• Medical mills. Organized rings of doctors, lawyers, chiropractors and others fabricate large volumes of fake injury claims. Many crooked clinics are mere fronts for fraud schemes, and often the clinics don't exist at all. In some cases, the worker injuries are real but the medical providers make fraudulent claims for treatment they never gave, or inflate insurance billings. Clinics also might recruit workers into the schemes, then make fake or inflated injury claims. As with premium scams and fake injury claims, there are no exact figures about the size of this problem.


Senior fraud

Seniors are frequent targets of insurance swindles. Seniors often have built up substantial assets to exploit. Many con artists also perceive seniors as overly trusting, inattentive to details and easily confused.

• Insurance Agents. Dishonest agents steal seniors' premiums without buying coverage... or convince them to cash out life policies with years of accumulated value so the agents can earn a large commission by selling a new policy they don't need... or slip unwanted costs into a policy.

• Discount medical plans. Shady medical discount plans target seniors who are seeking to find affordable health treatment.

• Staged accidents. Seniors are targeted by staged accident gangs that perceive seniors as inattentive drivers and easily confused at the accident scene.

• Medicare discounts. The new Medicare discount prescription program already is experiencing sale of fake Medicare cards and related scams.

• Health fraud. Dishonest doctors and other medical providers inflate claims for routine treatment, bill insurers for treatments that never happened, and perform often-dangerous and invasive surgeries on seniors who don't need the treatment. Aside from the danger to their health, excessive claims can max out seniors' coverage limits. This could deprive seniors of coverage when they most need it.

• Viaticals & life settlements. Seniors lose their life savings buying bogus viaticals and life settlements investments in life policies of dying, seriously ill or elderly people.


Airbag fraud

After an accident, dishonest body shops will replace deployed airbags with beer cans, rags, old sneakers, cheap gray-market bags, or bags that are incompatible with you're the damaged car. The body shop then charges the insurer several thousand dollars for a new airbag, leaving drivers without life-saving airbag protection when they're back on the road. Drivers have died when they crashed after body shops had failed to install new airbags. Used and rebuilt cars are especially prone to airbag swindles.

Windshield fraud

Crooks aggressively approach drivers at car washes, convenience stores and other outlets, enticing the drivers to replace or repair perfectly good car windshields. The crooks then bill insurers for new windshields or repairs that aren't needed. Usually the crooks offer drivers a variety of inducements: free car washes or movie tickets, plus the assurance that the driver's insurance company will pay for the repair. The risks can be substantial: The swindlers may use substandard glass or shoddy installation that can create serious safety hazards for drivers. The drivers also incur needless claims that could increase their auto premiums, and risk prosecution for insurance fraud.

Tainted-food shakedowns

People try to extort insurance settlements from businesses by planting dead mice or other objects in their food, then claiming it was the firm's negligence. One woman planted a dead mouse in her chili at a Cracker Barrel restaurant in Newport News, Va. She sought a large settlement, but lab analysis showed the mouse hadn't been cooked in the chili, and probably died in a mousetrap at the swindler's home.

Fake slip-and-fall injuries

Swindlers pretend to fall and be injured to extract insurance money from a business. They might drop grapes or lettuce leaves on the floor of a produce section in a grocery store, then say they were injured after slipping on the material. Another ruse is to pretend to fall on an uneven sidewalk or in a parking lot.

Scams by Professional Employer Organizations (PEOs)

Most PEOs are reputable; they provide insurance, accounting and other services for business clients. But crooked PEOs steal client workers compensation, liability or health premiums without buying the coverage. They may issue fake insurance policies or other documents to create the illusion of coverage. Some PEOs are complete fakes; they're fronts to convince unsuspecting businesses to buy nonexistent coverage and other services.

Fake business liability coverage

Smaller businesses in risky activities such as longhaul trucking and pesticides sometimes are sold bogus liability coverage. The swindlers exploit the owners' anxiety over high premiums and frequent lack of sophistication in insurance matters.

Fake death for life insurance

People will fake their deaths so they and their families can collect large life-insurance settlements. These scams often are committed by foreign nationals living in the U.S. A family member, for example, suddenly "dies" while "visiting" relatives in his or her native country typically a Third World nation. The schemers may bribe local bureaucrats to issue phony death certificates and other documentation. They might even videotape mock funerals and create fake grave plots to support the phony insurance claim. Life insurers often must hire investigators with expertise in those countries. Continued immigration to the U.S. makes this a persistent and costly crime. Fake death claims also occur in the U.S. A suspect may stage a boating accident, or disappear while "hiking" in the wilderness.

Street racing

Youths in many areas of the U.S. are involved in a deadly and growing culture of illegal street racing. High-speed deaths and injuries are common, and race events often involve dozens or even hundreds of juiced up production cars. Insurance fraud sometimes finances street racing: Losers often must give their engine, custom wheels or sound system to the winner. The loser then dumps his car somewhere and tells the insurer that thieves stole the components. Racers also falsely claim their car was stolen after wrecking or damaging it in a racing crash.

Medical discount plans

These are buyer clubs for medical services: You pay a membership fee and are promised discounted medical care by doctors, dentists and other providers. Discount plans can be useful for people having trouble buying affordable health insurance. But many plans are rife with fraud and deception: Savings are exaggerated in deceptively worded ads ("up to 60 percent savings!"). Extra fees are hidden in the fine print. Often medical providers don't even know they're in the plan, and thus don't offer the promised discounts. Some plans deceptively imply they're true insurance that fully pays your medical bills. Some plans also have fraudulently charged consumers' credit cards for membership fees even after the consumers declined to join.

Dental fraud

Dishonest dentists will pull teeth, do root canals and drill cavities for people with perfectly healthy teeth. These dentists hike their own insurance billings by charging insurers for painful, unneeded and invasive surgeries that often are botched and require more surgery to correct. Sometimes dentists charge insurers and government health programs for surgery and other treatments they never performed. They may also inflate bills by disguising routine procedures such as tooth polishing as more elaborate and expensive work. Dentists also are increasingly involved in drug diversion schemes.

Medicare discount prescriptions

Medicare's discount prescription Plan D has seen early signs of fraud. Con artists pretending to represent Medicare have sold fake Medicare cards door to door, even though the program doesn't allow door-to-door sales. Crooks also have tried to exploit those sales to convince seniors into revealing personal financial information that could be used for identity theft and other swindles.