7 Types of Insurance Scams To Avoid Falling Victim To

According to the Federal Trade Commission, American consumers reported losing nearly $10 billion to fraud in 2023, with one in four people reporting a loss. There were 2.6 million reports filed with median losses of $500 or more. While insurance companies do everything they can to avoid getting scammed by policyholders looking to make money without a legitimate claim, honest and trusting people also need to be wary of insurance scams that are aimed directly at them. Here are the seven most common scams that many Americans pay dearly for.

Key Takeaways Scammers may act alone or with a group but they are out to cause a car accident that looks like it was your fault. Seniors are often the victim of Medicare and annuities scams. Fake appraisers may visit your home after a storm and take off with your money at worst and do a terrible job at best. Predatory tow trucks seize the opportunity to charge exorbitant prices, so make sure to use a tow truck you called for.

1. Pretend Home Insurance Appraisers and Contractors

After a mild or severe storm, scammers will target neighborhoods affected by storm damage. They often go door-to-door, pretending to be home insurance appraisers, looking to help you fix a roof after a hail storm, for example.

You may need repairs but a legitimate appraiser from your insurance company will never come to your home without prior notice, and usually not unless you file a claim.

Insurers are not in the business of door-to-door soliciting, and these fake appraisers may contract someone out to do work on your home but with inferior materials and subpar results, all after pocketing the claim money. If they had your insurance information and received the money directly or if you pay them before they begin work, they may leave town without doing any work at all.

You may even have a contractor drop by, pointing out damages to your home that you may or may not have noticed. They may tell you that you can get a good insurance settlement and that they will do the work for you. They then do subpar work with cheap materials or take the money and fun.

On a side note: This is not a scam, but some insurers may try to low-ball repair costs but you can hire an outside appraiser if you know the repair will cost more.

Warning: Whatever route you take to get repairs, make sure you’re hiring a licensed, certified and insured contractor to work on home repairs or to install new roofs or home systems. Do not go with someone you’ve never met who knocks on the door. It’s always best to go with technicians referred by your insurer or to look for contractors in your area who have high reviews on Yelp, Angi and other places, even Nextdoor.

The sorts of people who go door-to-door are scammers pocketing much more money than they worked for, and you will be dinged by your insurer for a hefty claim settlement, which would raise your rate significantly.

2. Fake Injured “Passenger”

After an accident, call the police, no matter how minor the damages are to your car and the other driver’s car. It’s also a good idea not only to take photos of the damages to the other car but also of the passengers. There have been cases in which there were no witnesses to an accident, but people the driver has never seen before came forth, claiming to have sustained injuries in the car accident. These fake passengers may have legitimate physical problems but it’ll be your word against theirs without proof. This is a common auto insurance scam.

3. Predatory Tow Trucks

Scavenger tow trucks roam around looking for accidents and they may seize upon your car accident before you call for help or while you’re waiting for help. The problem is that they will hit you with an enormous bill, leaving you little choice but to pay it to get your car back.

Do not use a service you did not request. This type of scam runs so rampant that in some states, it’s against the law for tow trucks to report and offer services at a scene unless requested to do so to avoid this scam.^[1]

States Laws Against Predatory Towing

Many states have legislation either in place or in the works. Here are some of the bills, but you can call 800-835-6422 if you’ve experienced a towing scam.

State and Legislation	Details
California – Assembly Bill 1222	Prohibits a towing company from offering services unless summoned to the scene by the owner of the vehicle, owner/operator, or requested by law enforcement. Must provide proof that a tow truck driver was summoned to the scene Must provide a written estimate of all charges to the vehicle operator and a signature by the vehicle operator before proceeding with the tow and maintaining a cap on the amount of the tow. Must maintain a record of all towing documents for a period of 3 years and to make those records available for inspection by law enforcement Misdemeanor penalties for breaking these rules.
Illinois – Senate Bill 2261	Penalties for towers who illegally solicit accident victims - Class 4 Felony Towers who violate the accident scene solicitation law can be sued by the vehicle owner and/or the owner's insurer. Statewide relocation towing commission tasked with examining the towing laws of the state and to make recommendations
Missouri – House Bill 1976	Prohibits a towing company from arriving at the scene unless summoned by the owner of the vehicle, owner/operator, or requested by law enforcement, unless it's an emergency situation Must allow vehicle owners access to storage yard with requirements for when storage yards to be open Towers must provide a written estimate of all tow-related charges upon request. Requires a tow rotation list be maintained and utilized by the Missouri State Police, but local jurisdictions are not mandated to use that list Misdemeanor penalties for 1st offense, felony on 2nd
Ohio – House Bill 341	Allows a civil action by insurers against a towing company operator to recover a vehicle. The vehicle is released within 2 days of the insurance company paying the "undisputed amount" of the bill from the towing company.
Pennsylvania	NICB is working with lawmakers from the Pittsburgh area to address towing abuses in Pennsylvania. The problem is most prominent in Philadelphia and Pittsburgh.

4. Staged Accidents

Believe it or not, there are people out there trying to get hit by your car. They may not even be acting alone. You may be swarmed by multiple cars involved in a staged accident. Here are the most common types of staged accidents scammers provoke to steal car insurance money:^[2]

LEFT TURN DRIVE DOWN

As you go to make a left turn, a driver heading the other way waves for you to go ahead and turn. As you move ahead to complete the turn, the driver who waved you through suddenly moves forward blocking your entrance. You stop to avoid an accident but another car approaches and slams into the side of your car. The car blocking you leaves the scene, making it look as if you are at fault for pulling into oncoming traffic.

The driver and passengers of the car that crashed into you will all claim you pulled into traffic when it wasn’t clear and they will all claim injuries. A claim will be filed against your insurance company to pay and unless you have photos of the other car involved or a license plate, it’ll be very hard to prove that you got scammed.

RIGHT TURN DRIVE DOWN

You reach an intersection and prepare to make a right-hand turn. Suddenly, another vehicle runs into the back-left side of your car. The driver and passengers of the car that crashed into you will say that you pulled into traffic when it wasn’t clear. They will all claim injuries. The driver will file an insurance claim against you, and unless an investigation is made into fraud, you will be penalized for being at-fault.

CURB DRIVE DOWN

You prepare to merge into traffic after being parked at a curb. It’s clear, so you go. Suddenly, a car crosses from the left lane and deliberately crashes into you. The driver and passengers claim you pulled into traffic when it wasn’t clear. They will all claim injuries. The driver will file an insurance against you, and unless an investigation is made into fraud, you will be penalized for being at-fault.

SWOOP-AND-SQUAT (involves two scammers’ cars)

The driver of the “squat” vehicle pulls in front of your car. The driver of the “swoop” vehicle abruptly pulls in front of the squat vehicle, and the squat vehicle slams his brakes, causing you to rear-end the squat vehicle. The swoop vehicle gets away leaving you to look responsible for the accident. The squat vehicle and passengers will claim injuries and say there was no other car involved. The driver will file an insurance against you, and unless an investigation is made into fraud, you will be penalized for being at-fault.

ON A FREEWAY OR EXPRESSWAY (involves three scammers’ cars)

Similar to the example above, but the third criminal boxes you in so you cannot change lanes when the swoop vehicle cuts off the squat vehicle. Following the crash, the swoop and box-in cars take off, again forcing you and your insurance company to pay the claim.

5. Telephone and Email Scams

Phishing scams with emails using an insurer’s logo with a click-to link are becoming more common. It’s a good idea, when you get an email from your insurer, to directly log onto your account to read important messages or see interesting offers. Clicking through on a cloned page could lead you to reveal very sensitive information or your computer may get hacked.

Telephone calls from scammers claiming to be calling from an insurer’s office are common too. They may ask for personal information, like your insurance policy number and then, even worse, your social security number. Your insurer should never call you asking for your social security number, if they are already your insurance company.

6. Annuities and Medicare Scams Against Seniors

Scams against seniors are the most unethical and most common. According to the Federal Bureau of Investigation (FBI) Internet Crime Complaint Center (IC3), in 2022, there were 88,262 complaints of fraud from people aged 60+ resulting in $3.1 billion in losses – a 82.35% increase since 2021.^[3]

Scammers often contact seniors claiming to be from the Internal Revenue Service (IRS), Social Security Administration or Medicare to get older adults to share their personal information or provide unnecessary or bogus services and bill Medicare for high costs. Medicare will never call you asking for your Medicare number or social security. Not only does providing them this information put you at risk of identity theft, the scammers may get medical services billed to your account, so check to see what Medicare is being charged for, from time to time.

Scam agents may call and get seniors to grant them as an annuity contract beneficiary. They claim they will open an annuity account and must move their money into a new account. They then steal the money instead of depositing it into the annuity.

Some seniors are sold a product that’s not really right for them, and they only have about 20 days to undo the mistake without penalty. Like a terminally ill person being sold an annuity they cannot collect for decades.

If you’ve been the target of annuity fraud, contact the Financial Industry Regulatory Authority (FINRA) at 977-499-7295.

7. Medical Identity Theft

Medical identity theft is similar to identity theft in that your health insurance is being used by another person, either to get treatment or to gain financially. It’s always a good idea to review services and doctor visits that your insurance company sends you to make sure you are not the victim of this crime. If you are, you can contact the US Department of Health & Human Services program 1-800-447-8477.^[4]