The Coalition Against Insurance Fraud defines insurance fraud as “The intentional providing of false or misleading information, or withholding of material information, as part of an insurance transaction.”1
While fraud affects all types of insurance, one of the most common is life insurance. The total cost of life insurance fraud is estimated to be a more than $75 billion per year problem.2
"Four out of 5 consumers admit that they are concerned about insurance fraud and the damage it causes."
Four out of five consumers admit that they are concerned about insurance fraud and the damage it causes.1 Working with a known, trusted insurance company and staying aware of common scam tactics are good ways to help avoid this costly nightmare.
What are some common life insurance scams?
Here are 5 common life insurance scams that you should be aware of:
- Online scams occur with phony websites, unrealistic rates, or the selling of fake policies.
- Fee churning refers to an unethical and often illegal practice where an insurance agent or broker persuades a policyholder to surrender or replace the policyholder's existing insurance policy with new ones. This is primarily done to generate additional commissions for the insurance agent or broker rather than to benefit the customer.
- Bait and switch is when a malicious agent might sell a policy with benefits or terms that vary from what was agreed upon.
- Kept premiums refers to when an agent keeps the premium payments made by an insured instead of submitting them to the insurance company.
- Fraudsters might contact you saying there is a problem with your current policy and ask for your personal identifiable information or even a payment to keep the policy active.
How do I help protect myself from insurance scams?
How can you help protect yourself? Start with using a reputable insurance company or agency. The professionalism of a trusted insurance company agent will help give you assurance that you are not being scammed.
Also, trust yourself. Common sense can go a long way in preventing being scammed. Watch for typos, cold calls, and pricing that is simply too good to be true. Another red flag is if the agent asks you to make your check out to them, personally. Also, be aware if the person that contacts you pressures you with a sense of urgency to sign a document or send money, that is possibly a sign that they are not who they claim to be. You can always hang-up and contact the insurance company directly.
What do I do if I think I’m already a victim of an insurance scam?
If you do fall victim to a scam, the sooner you react the better you can help mitigate the damage for yourself. First, don’t pay any more money. Next, depending on what information you have provided to the scammer, you may need to contact your bank, freeze your accounts, change passwords, and report your information as stolen to local law enforcement and to the Federal Trade Commission’s (FTC) website identitytheft.gov.
If you suspect fraudulent activity, contact your insurance company directly. Individuals are also encouraged to report suspected insurance fraud to:
- Your state insurance fraud bureau. A list of state insurance fraud bureaus, along with each office's contact information for reporting fraud, can be found here: https://insurancefraud.org/state-insurance-fraud-bureaus.
- Your Local FBI office. You can learn more about how to contact your local FBI office online here: https://www.fbi.gov/contact-us/field-offices
- The National Insurance Crime Bureau (NICB). This is a non-profit organization that partners with insurance companies and law enforcement to help identify, detect, and prosecute insurance criminals. Contact them at 800-835-6422 or https://www.nicb.org/how-we-help/report-fraud.
Sources:
- InsuranceFraud.org, Coalition Against Insurance Fraud, Accessed 2024
- NAIC.org, Insurance Fraud, Background, Accessed 2025
Categories: Life Insurance, Whole Life Insurance