Types of Insurance Fraud

In This Section

Automotive Insurance Fraud

This type of fraud entails someone attempting to deceive an insurance company about a claim involving their personal or commercial motor vehicle. It can involve giving out misleading information or providing false documentation to support the claim.

The majority of automotive insurance fraud arrests in Pennsylvania involve:

  • staged auto accidents and false claims of injury
  • false reports of stolen vehicles
  • false claims that an accident happened after a policy or coverage was purchased
  • false claims for damage that already existed
  • claimants who concealed that a person excluded from coverage by their policy was driving at the time of the accident
  1. Susan was driving without insurance and had an accident. When she applied for insurance, she lied. She said she’d had no accidents. Then she filed a claim saying that her car had been damaged, lying that the accident happened after the policy took effect.
  2. When Howard purchased his policy, he admitted his adult son Trevor lived with him but didn’t have a valid driver’s license. So Trevor was listed on the policy as an “excluded driver.” Howard’s policy was clear that the insurance company would not pay any claim for loss or injury if Trevor was operating the vehicle at the time of an accident. But after Trevor crashed Howard’s car into a telephone pole, Howard submitted a claim and lied by saying he was driving.
  3. After Mickey’s car was rear-ended, he didn’t feel so hot. But he exaggerated the extent of his injuries saying his neck and back hurt and went for medical treatment he knew he didn’t really need in order to get a larger settlement from the insurance company.
  4. The transmission on Joan’s SUV was shot and mechanics told her it would cost $4,000 to fix. She couldn’t sell the SUV and still owed the bank $2,500 on her auto loan. She gave her keys to a “friend” to get rid of the SUV for her and reported to the police and her insurance company that the SUV had been stolen — so the insurance company would pay off her auto loan.

Consequences

Automotive insurance fraud is a serious crime. As with all other types of insurance fraud‚ Pennsylvania considers it a felony. Violators can spend up to seven years in prison and spend up to $15‚000 in fines. There are also many other associated expenses such as court costs and legal fees. Plus‚ those found guilty of insurance fraud have the stigmas and limitations of being a convicted felon to carry with them for life.

Health Insurance Fraud

In this type of fraud‚ false or misleading information is provided to a health insurance company in an attempt to have them pay unauthorized benefits to the policy holder‚ another party‚ or the entity providing services. The offense can be committed by the insured individual or the provider of health services.

An individual subscriber can commit health insurance fraud by:

  • allowing someone else to use his or her identity and insurance information to obtain health care services
  • using benefits to pay for prescriptions that were not prescribed by his or
    her doctor

Health care providers can commit fraudulent acts by:

  • billing for services‚ procedures and/or supplies that were never rendered
  • charging for more expensive services than those actually provided
  • performing unnecessary services for the purpose of financial gain
  • misrepresenting non–covered treatments as a medical necessity
  • falsifying a patient’s diagnosis to justify tests‚ surgeries‚ or other procedures
  • billing each step of a single procedure as if it were a separate procedure
  • charging a patient more than the co–pay agreed to under the insurer’s terms
  • paying “kickbacks” for referral of motor vehicle accident victims for treatment

  1. Chris was the only one in his family with health insurance, but he let his brother and cousin use his card to receive health care benefits.
  2. A nurse in Dr. Smith’s office became addicted to painkillers and with access to patient records she called in forged prescriptions to a local pharmacist and posed as a family member of the patient when she picked up the drugs.
  3. Devon was addicted to painkillers, stole and forged prescription forms from his doctor’s office, passed them at a local pharmacy, and used his health care insurance to pay for the drugs.
  4. Dr. Talbot billed his patients’ health insurance for both the services he actually provided and for services that were not provided. He falsified his patients’ medical records to reflect office visits and treatments that never occurred.
  5. Dr. O’Neill received the results of medical testing performed by a diagnostic firm for her interpretation of the results. She billed the patients’ health insurance as though she performed both the testing and interpretation of the tests.
  6. Dr. Salazar was employed by a medical center where low-income and indigent patients were recruited to undergo unnecessary exams. While Dr. Salazar saw few patients, medical records were falsified by a physician’s assistant to support the billing of insurance programs for procedures that were never performed.

Consequences

Most health insurance includes specific benefits‚ and health insurance fraud practices such as overbilling for the type of services received robs consumers of these benefits.

This is why health insurance fraud is such a serious crime. As with all other types of insurance fraud‚ Pennsylvania considers it a felony. Violators can spend up to seven years in prison and spend up to $15‚000 in fines. There are also many other associated expenses such as court costs and legal fees. Plus‚ those found guilty of insurance fraud have the stigmas and limitations of being a convicted felon to carry with them for life.

Homeowners Insurance Fraud

This type of fraud takes place when someone knowingly submits an inflated claim on their homeowners or renters policy for more than the actual value of the loss or damage. Submitting a false or misleading claim to receive undeserved compensation is also considered homeowners fraud.

The most common types of homeowners insurance fraud in Pennsylvania involve:

  • overstating the value of stolen items in a burglary of a home or vehicle
  • lying about the extent‚ cause‚ date or location of damage
  • intentionally damaging property to make a claim
  • staging a phony burglary or vehicle break–in and faking the theft or damage
    of property
  • asking a repairman to “cover the deductible” by increasing their estimate or bill
  • fabricating supporting evidence‚ such as repair bills or receipts‚ often in collusion with a crooked contractor‚ plumber‚ repairman or insurance adjuster
  • concealing that a residence is used as a rental or in a commercial business
  1. A strong storm blew the shingles off of John’s house. When the insurance adjuster inspected the roof, John also said some siding was damaged during the storm, even though the siding had been damaged when John bought the house.
  2. During a trip to Philadelphia, Rebecca’s car was broken into. Her motor vehicle insurance paid to fix the damage done to the car. On her homeowners insurance claim, she said the items she lost were a lot nicer than they really were — a leather coat instead of a denim jacket — and she added a few extra items to the list she gave to her homeowners insurance company.
  3. Zeke’s big screen TV quit working, then his home was struck by lightning. He told his insurance company the TV had been damaged by the electrical storm.

Consequences

Homeowners insurance fraud is a serious crime. As with all other types of insurance fraud‚ Pennsylvania considers it a felony. Violators can spend up to seven years in prison and spend up to $15‚000 in fines. There are also many other associated expenses such as court costs and legal fees. Plus‚ those found guilty of insurance fraud have the stigmas and limitations of being a convicted felon to carry with them for life.

Workers’ Compensation Insurance Fraud

As with other forms of insurance fraud‚ workers’ compensation insurance can be compromised by either employers or its employees if false or misleading information is provided to insurance companies.

The most common ways an individual commits insurance fraud is if he or she:

  • fakes an injury at work to get paid time off
  • exaggerates the severity of a legitimate injury to get additional time off work
    with benefits
  • claims an injury occurred on the job when it actually took place elsewhere
  • takes a new job and lies to the insurance company about being unable to return to work at the previous place of employment‚ or lies by concealing his/her income from another job

An employer can commit insurance fraud if he or she:

  • understates the amount of company payroll to reduce premium payments
  • claims employees are independent contractors
  • lies about the type of work employees do in order to qualify for and pay
    lower premiums
  1. Phyllis injured her back while renovating her home’s bathroom, but she claimed a slip and fall at work caused the problem so she could claim workers’ compensation benefits and receive payment of her medical bills and lost wages.
  2. Tony owned a profitable roofing company. To save money, he told his workers’ compensation insurance company that a number of his staff were clerical workers, a much lower risk and therefore eligible for a lower premium.
  3. Donna operated a restaurant and bar but didn’t purchase workers’ compensation insurance. After an employee was injured in a fight between bar patrons, there was no workers’ compensation insurance to pay the several thousand dollars in medical treatment needed by the employee.
  4. Steve was injured at work and his employer’s workers’ compensation insurance covered his medical bills and lost wages for the time he was unable to work. While still receiving disability payments, Steve went to work for another company. He concealed his new job from his old employer. He reported he was still disabled and signed a statement to that effect to his old employer’s workers’ compensation insurance company.

Consequences

Workers’ compensation insurance provides a “safety net” for workers injured on the job‚ and this is why workers’ comp insurance fraud is such a serious crime. As with all other types of insurance fraud‚ Pennsylvania considers it a felony. Violators can spend up to seven years in prison and spend up to $15‚000 in fines. There are also many other associated expenses such as court costs and legal fees. Plus‚ those found guilty of insurance fraud have the stigmas and limitations of being a convicted felon to carry with them for life.

Did you know workers’ comp fraud across the country costs more than $32 billion every year? See how this impacts you. See the infographic (PDF).