How Insurance Fraud Hurts You—And How To Fight Back – Forbes Advisor


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Damian Labeaud—aka “The Slammer”—created havoc on Louisiana interstates. His M.O. was ramming his pickup truck into an 18-wheeler, then hopping into a getaway car and disappearing before the police arrived.

The trucking company was sued on behalf of Labeaud’s phantom passengers, who had “suffered whiplash that caused neck and soft tissue injuries.”

No one was injured in these alleged “accidents,” but there were real victims: the insurance companies that paid the phony claims and the trucking companies forced to pay higher insurance premiums to their carriers.

 

The Cost of Insurance Fraud

Insurance fraud isn’t limited to the roadways. Victims of fraud exist across multiple sectors, including auto, medical, and homeowners insurance.

The Coalition Against Insurance Fraud (CAIF) pegs the annual cost of insurance fraud at around $80 billion, with non-health insurance fraud accounting for half of that. Unfortunately, much of that expense is passed on to the consumer. According to the FBI, insurance fraud can cost policyholders an extra $400 to $700 a year in premiums.

“Insurance fraud is a crime we all pay for,” says Joseph Matos, communications director of the CAIF, a non-profit alliance of consumers, insurers and government agencies that uncovers criminals who prey on insurers.

How to Spot Insurance Fraud

Criminals and insurance fraudsters victimize your personal safety, health and financial security. This list of common scams will help you identify red flags and protect yourself from fraud.

Towing “bandits”

Bandit tow trucks materialize after an accident—staged or not—and attempt to pressure shaken drivers into signing a release form, allowing them to tow your car to the body shop of their choice. If your car is towed to a dishonest repair facility, mechanics may perform shoddy repairs not covered by insurance, and charge exorbitant fees.

Faulty airbags

If your vehicle is towed to a dishonest repair shop, the mechanics may install a deflated airbag that wouldn’t protect you or your passengers in the event of an accident.

How can you tell? Check the light on the dashboard that indicates the airbag is functioning.

Damaged and resold vehicles

Salvage fraud is another form of deception by which a dealer will resell a vehicle that’s been damaged, often by flooding, without revealing the vehicle’s history. Floods can short out and rust car engines, so unscrupulous dealers sometimes try to sell flood damaged cars as repaired or nearly new.

The NICB offers a list of ways to detect a “flood vehicle” as well as a VIN lookup service that shows you a car’s history.

Opportunistic home repair contractors

“After every natural catastrophe, NICB investigators see contractors move into impacted communities offering to help people put their homes back together,” says David Glawe, president of the NICB. Most are honest, but beware of ones who offer to get you on their schedule if you “pay a certain amount now.” And don’t count on those who say they will “work with your insurer.”

NICB provides a step-by-step list of how to avoid contractor fraud.

Bereavement vultures

Scammers read obituaries in order to prey on grieving spouses by claiming the deceased owed money on a life or health insurance policy or had a contract with the caller.

If you’ve recently lost a loved one, be wary of unsolicited emails, texts, or phone calls from insurance brokers asking for immediate payment on outstanding bills.

How to Report Insurance Fraud

If you suspect or experience insurance fraud, it’s important you report it. There are several ways you can file a complaint.

  • Reach out to your state’s fraud bureau, if available
  • Contact your insurer to see if they have a system in place to report fraud.
  • Visit the NICB website and click the “Report Fraud” button to anonymously report a crime.
  • Report it to your local FBI branch.

For more resources, including contact information for state and federal insurance and law enforcement agencies, visit the CAIF website.

Pulling the Thread: Database Used to Nab Scammers

Insurers have the same vested interest in ferreting out fraud as you do. That’s why they have their own internal investigative units, which look into rogue insurance agents who pocket premiums and scammers ​​who claim to be agents and try to sell you low-cost health insurance.

Insurance companies also maintain a huge database of criminals and their activities, part of which is visible to the public. And while one claim may not get their attention, a thread of encore performances will. Like “The Slammer,” a fraudster is apt to commit the same crime over and over again in different states, bilking different insurers but using the same fake “victims.”

Since one thread leads to another, the whole criminal network will unravel, just as it did for Damien Labeaud, his lawyer and his friends, who now face jail time.



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