A CONSUMER GUIDE TO
INSURANCE
FRAUD
A CONSUMER GUIDE TO
INSURANCE
FRAUD
INSURANCE ADMINISTRATION
A CONSUMER GUIDE TO INSURANCE FRAUD
Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
TABLE OF CONTENTS
Introduction ....................................................1
Insurance Fraud..................................................1
What Is Insurance Fraud? ..........................................2
Consequences of Insurance Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Fraud Against Seniors .............................................5
Fraud Against Businesses ...........................................6
Drug and Health Discount Programs .................................8
Avoid Being A Victim .............................................9
Additional Tips To Protect Yourself Against Insurance Fraud...............10
What To Do If You Are Involved In An Auto Accident . . . . . . . . . . . . . . . . . . . 12
Report Insurance Fraud...........................................14
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Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CONSUMER GUIDE TO INSURANCE FRAUD
INTRODUCTION
e Maryland Insurance Administration (MIA) is an independent state agency that
regulates Maryland’s insurance marketplace and protects consumers by ensuring
that insurers and insurance producers (agents and
brokers) act in accordance with insurance laws.
We produced this guide to help educate Maryland
residents about insurance fraud.
e Insurance Administration also is responsible
for investigating and resolving complaints and
questions concerning insurers that conduct business
in Maryland.
INSURANCE FRAUD
Insurance fraud is one of the most costly white-collar crimes in America. Insurance
fraud ends up increasing the amount everyone pays in insurance premiums to oset
the cost of the fraud. By law, all applications for insurance and all claim forms must
contain the following statement, or a substantially similar one:
Any person who knowingly and willfully presents a false or fraudulent claim
for payment of a loss or benet or who knowingly and willfully presents false
information in an application for insurance is guilty of a crime and may be
subject to nes and connement in prison.
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A CONSUMER GUIDE TO INSURANCE FRAUD
WHAT IS
INSURANCE FRAUD?
Insurance fraud occurs when someone deceives either an insurance company or a
consumer in an insurance transaction in order to make money. Insurance fraud can
be divided into two major categories.
1. Fraud by an insurance agent, an insurance
employee or someone posing as an authorized
representative of an insurance company or agent.
Examples of these types of fraud are:
• Fake/False Documents – An insurance agent
or insurer issues fake policies, certicates,
insurance identication cards or binders.
• False Statements – A producer or consumer makes a false statement in
the sale or issuance of a policy, or on the application itself. For example,
an individual or a company represents to the public that they are licensed
to act as insurance producers or public adjusters in the state when they
have not received the appropriate license from the Maryland Insurance
Administration. An insurance agent falsely reports that an applicant has a
burglar alarm to qualify the individual for a special discount.
• Pocketing Premiums – An insurance agent or insurer pockets the
premium, and then issues a phony policy or none at all.
• Selling Unauthorized Insurance – It is illegal to sell an unauthorized
insurance product. e exception to this is policies that are written in the
surplus lines market. ese policies must be clearly labeled as surplus lines
products. In addition, policies sold in Maryland must be approved by the
Maryland Insurance Administration. Unlicensed companies will collect
premiums and oer policies that appear to provide extensive coverage. e
premiums are very low and for that reason are very appealing; however,
these policies frequently will not pay your claim or will not pay what you
think you are entitled.
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A CONSUMER GUIDE TO INSURANCE FRAUD
2. Fraud by individuals, policyholders, medical providers or other service providers
against the insurance company to receive money for ling a false claim or inating a
legitimate claim. Examples of this type of fraud include:
• Arson for Prot – A business, home, or vehicle is intentionally set on
re by the owner or someone acting on behalf of the owner to collect
insurance money.
• Disaster Fraud – An individual persuades a disaster victim to claim more
damages than actually occurred.
• Creating a Fraudulent Claim – is may include: staging or intentionally
causing an auto accident; staging slip-and-fall accidents; claiming an injury
occurred on the job when it did not; falsely claiming a foreign object in
a food or drink; faking a death to collect benets, or ling a phony death
claim; murder-for-prot; phony burglary, theft, or vandalism; arson;
staging auto thefts; and staging homeowner accident or burglary.
• Exaggerated Claims (Overstating the Amount of Loss) – ese can
include: inating bodily injuries from an auto accident or work-related
injury; inating the value of items taken during a burglary or theft;
inating a physical damage claim from a minor fender bender; and medical
providers inating billing or upcoding of medical procedures.
• Medical Fraud (“Medical Mills”) – Medical providers bill insurers for
services they do not provide or inate the bills for services. ese scams
frequently are connected to automobile accidents or disability claims.
• False Health Claims – Knowingly making a false statement or
representation in a health insurance claim or application, by a patient or by
a provider, to an insurance company or to a state health plan or program.
• Storm Chaser Fraud – Contractors who contract for repairs they never
plan to perform. ese contractors often go door to door after a big storm
or natural disaster soliciting work and may use pressure tactics to get your
home repair business. Such tactics can include saying the price is only
good until the end of the day or they will give you a special discount if you
make a cash deposit now.
• Contractor Deductible Fraud – Where a contractor who is making
insurance-covered repairs for weather-related damage oers or actually pays
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A CONSUMER GUIDE TO INSURANCE FRAUD
all or part of the homeowner’s insurance policy deductible with the intent
to defraud the insurer.
• Drive-Down – A driver waves on another driver, indicating it’s O.K. to
proceed, and then intentionally hits the passing car.
• Hit & Run – Using a pre-damaged vehicle, a dishonest individual claims
they were in an accident and can’t identify the other driver, often calling
police to verify.
• Sideswipe – A driver in the inside lane of a dual left-turn lane in a busy
intersection drifts into the outer lane, intentionally forcing a collision.
• Swoop & Squat – is scam occurs when the vehicle you are following is
suddenly passed by another vehicle that “swoops” in front of it. is causes
the vehicle in front of you to stop abruptly, or “squat.” As a result, you
are unable to avoid colliding with the rear end of the vehicle. e drivers
of both the swoop and squat cars planned the accident. e swoop car
typically never will be seen again. e driver of the squat car may submit a
claim to your insurer for damage to his car and for personal injury.
CONSEQUENCES OF
INSURANCE FRAUD
Generally speaking, insurance fraud results in higher insurance premiums for all
policyholders. e insurers must charge all policyholders higher premiums in order
to maintain legal requirements with regard to capital and surplus, when insurers pay
fraudulent claims for: unnecessary repairs or those not made properly; for property
that was not damaged or stolen; for injuries that were not as severe as reported or
did not result from a workplace accident.
In addition, when businesses pay higher insurance premiums, those costs are usually
transferred to consumers through higher prices for goods and services. If the
costs become high enough, demand for those goods and services falls. If demand
decreases considerably, jobs may be lost. Finally, insurance fraud also can result in
criminal prosecution, jail time, penalties and nes, and/or a civil fraud penalty and
restitution.
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A CONSUMER GUIDE TO INSURANCE FRAUD
FRAUD AGAINST
SENIORS
Seniors are often fraud targets, particularly in regard to
life and health insurance. Seniors are more likely than
others to need these coverages, and many worry that
they’ll become a burden to family if they don’t have
enough insurance. If you are a senior, it’s a good idea
to seek advice from your friends or family, or from
a trusted accountant, attorney, or nancial adviser
before making an insurance purchase. Be especially
wary of a salesperson or telephone caller who:
• Contacts you unsolicited. e salesperson has probably obtained your
information through a mailing list. Not all agents who contact you are
dishonest, but it’s a good idea to be cautious.
• Uses high-pressure tactics. Common tactics include oering a “last-chance
deal,” appealing to your sympathy or emotions, or attempting to pressure
you to sign forms without carefully reviewing them with you so that you
fully understand them. Also, any decision to buy insurance should be made
rationally, based on a sound assessment of your nancial needs.
• Urges you to cash in an existing annuity or life insurance policy to buy
a new annuity, life insurance policy, or other investment. Annuities
and life insurance generally are worth more the longer you keep them.
Changing to a new annuity or policy may cause you to lose money over
the rst three to ve years.
• Claims to be from Medicare, Social Security, or another government
agency. e government does not sell insurance. An agent or broker who
claims to be associated with the government is breaking the law.
• Wants to sell you a package policy that includes several dierent
benets, some of which duplicate a policy you already have or include
coverage you do not need.
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Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CONSUMER GUIDE TO INSURANCE FRAUD
• Wants you to pay cash or make your check/money order payable
to him.
• Wants you to sign forms that contain false or incomplete information
or are blank.
If you suspect Medicare fraud (for example, overbilling for
services or billing for services you did not receive) or if you
would like more information, you should contact the Maryland
Senior Medicare Patrol at the Maryland Department of Aging at
800-243-3425 or 410-767-1100 or https://aging.maryland.gov/Pages/
senior-medicare-patrol.aspx.
FRAUD AGAINST
BUSINESSES
Businesses are often targets of the most ambitious and nancially damaging
schemes. Businesses with risks that are hard to insure and small businesses that have
diculty aording coverage are particularly vulnerable.
e sale of unauthorized health insurance is one of the most common schemes. A
fraudulent insurer may claim to be associated with a trade union, trust, or “Multiple
Employer Welfare Agreement” (MEWA), which allow small companies to pool
their resources when purchasing health plans.
A fraudulent company also may claim its plan is exempt from state regulation
because it’s a “self-funded” plan authorized by the federal Employee Retirement
Income Security Act (ERISA). While it is true that ERISA plans are exempt from
most state laws, they usually are created by businesses and organizations to cover
their own employees or members. Your business almost never will be sold a valid
ERISA plan from an outside company or agent.
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Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CONSUMER GUIDE TO INSURANCE FRAUD
Business insurance fraud frequently involves workers’ compensation coverage. In
most cases, employers with a valid workers’ compensation policy are protected
from lawsuits by injured employees. Policies sold by unauthorized or fraudulent
companies are not considered workers’ compensation under state law and do not
provide these protections.
Employers should be honest and exercise diligence in classifying individuals who
perform work for their companies as employees. Under the Insurance Article, it
is a fraudulent insurance act to knowingly or willfully make a false or fraudulent
statement or representation in, or with reference to, an insurance application. An
employer who misclassies individuals who perform work for their companies may
also be in violation of other state laws, including the Insurance Article, and may
be subject to additional civil penalties and/or criminal prosecution under those
laws. If you encounter any diculty purchasing workers’ compensation insurance
in the private market, Chesapeake Employers Insurance Company may be able to
underwrite coverage for your business. Chesapeake Employers Insurance Company
can be contacted at 410-494-2000, 800-264-4943 or at www.ceiwc.com.
Other lines of insurance that frequently are sold fraudulently to businesses include:
• medical malpractice
• commercial general liability
• contractor performance bonds
• auto liability coverage for truckers.
If you’re in the market for any of these types of insurance, be sure to verify with the
Maryland Insurance Administration the license or surplus lines registration status of
the companies you’re considering by calling us at 800-492-6116 or 410-468-2000.
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Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CONSUMER GUIDE TO INSURANCE FRAUD
DRUG AND HEALTH
DISCOUNT PROGRAMS
In Maryland, there are two basic types of discount
plans available: Discount Medical Plans and Discount
Drug Plans. ese plans may be structured to look
like insurance, but they are not insurance and don’t
pay any of your health care costs. Instead, discount
plans give plan members access to a group of providers
of health care services and supplies on a discounted
basis.
We all have seen the billboards or received an email promising to “save 50%
to 80%” on the cost of health care. With the rising cost of health care and
prescription drugs, these advertisements are becoming more and more enticing.
Consumers should be careful when considering purchasing a discount plan because
each one is dierent, and not all those that are advertised comply with the law.
Discount plans must register with the Maryland Insurance Administration unless
they are oered by entities that are licensed to do insurance business in Maryland
– such as insurers, nonprot health service plans, health maintenance organizations
(HMOs) or dental plan organizations.
Before you become a member of a Discount Medical Plan or Discount
Drug Plan, it is important to understand how the plans work and how they can
be used. You also need to understand exactly how much money a discount plan
will save you and how much it will cost to join. Refer to our guide, What
Consumers Need to Know About Discount Medical and Discount Drug Plans
at www.insurance.maryland.gov to learn more.
When considering any type of discount program, make sure the program is right for
you and oers a genuine cost savings. For instance, nd out whether the discount
program covers the prescriptions you need. In some cases, you can save as much
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Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CONSUMER GUIDE TO INSURANCE FRAUD
or more money on your prescriptions by purchasing them at a discount pharmacy
than by enrolling in a discount program. Some discount programs falsely claim to
be accepted by certain doctors and providers when they are not. Before joining a
discount program, contact your doctors and other health care providers to make
sure they participate in the program.
If you believe a discount program has been misrepresented to you, or you’ve
been misled in some other way, contact the Maryland Attorney General’s Health
Education and Advocacy Unit at 410-528-1840 or toll-free 877-261-8807.
AVOID BEING A VICTIM
Pay close attention to the medical and repair bills you receive. If your auto
mechanic charges you for repairs you never received, or tells you that he will
inate your bill to cover the cost of your deductible, watch out. is mechanic is
committing insurance fraud and you could be charged as an accomplice if you assist
him in any way. Another way of protecting yourself against fraud is to inspect the
part your mechanic has replaced. Under Maryland law, car repair customers are
generally entitled to the return of any replaced parts.
When you have a doctor’s appointment, sign only one claim form per visit. Make
sure you date this form. is makes it easier for your insurer to match bills with
services. It also makes it harder for unscrupulous healthcare providers to double-bill
or bill for services they never provided.
When you get a notice of payment from your insurance company, check it closely.
If it is for a service you don’t remember getting or something you’re just not clear
about, contact your insurer or the insurance administrator where you work. It
could be a mistake, or it could be fraud. Medical identity theft could result in false
claims led with your insurance policy as well as incorrect information in your
medical records. Always review your explanation of benets (EOBs) statements
and medical records to make certain that they all pertain to treatment you actually
received.
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Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CONSUMER GUIDE TO INSURANCE FRAUD
Check our website to see if the insurance company is licensed to sell insurance in
Maryland. [Go to www.insurance.maryland.gov and select “Company Search” from
the menu on the left side of the screen.]
Even if the insurance company claims to be exempt from state regulation or is
utilizing a license as a ird-Party Administrator (TPA), contact the Maryland
Insurance Administration to check if the company is really exempt.
Check to see if the agent or broker is licensed. [Call us at 410-468-2000 or
800-492-6116 or visit https://www.apps.insurance.maryland.gov/
CompanyProducerInfo/]
A trusted insurance advisor can assist you to make certain that you are purchasing a
licensed product.
ADDITIONAL TIPS
TO PROTECT
YOURSELF AGAINST
INSURANCE FRAUD
• Shop around. Many schemes promise extensive coverage at a very low price.
You can usually save money by comparison-shopping, but be cautious of any
plan or policy that costs signicantly less than others you’ve priced.
• Take your time. Make certain you understand the type of policy
and coverages you are buying before you write a check, give out your
bank account information, or provide credit card information to any
person or entity. Even if the person appears trustworthy, if you feel
at all uncomfortable – WAIT! Take as much time as you need to feel
comfortable. Do not feel pressured to make an on-the-spot decision. Ask
the individual selling you the policy for a business card and the documents
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Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CONSUMER GUIDE TO INSURANCE FRAUD
you will need to sign so that you may review them at your leisure.
• Always pay by check or credit card. Check and credit card payments
usually can be traced and veried. If you pay by credit card, you also may
be able to get reimbursed by the credit card company in the event of fraud.
If you must pay cash, be sure to get a receipt that shows the name of the
company, the date, and the amount paid.
• Be cautious of policies sold door-to-door or over the phone.
Unauthorized companies often use these methods to market their
products. Insist on knowing a company’s physical address, and make sure
you verify that the company and agent is licensed. Also, verify that the
policy terms and rates are comparable to those available elsewhere.
• If you buy insurance over the Internet, take the same precautions as
you would for any insurance purchase. Many legitimate companies
have websites that allow you to purchase insurance online. is can
make shopping for insurance easy and convenient. However, the Internet
provides the anonymity that also can allow illegitimate companies to
ourish. erefore, it’s important that you take the same precautions when
buying insurance over the Internet as you would when buying insurance
in any other way. Verify that the company is licensed and make sure you
understand the exact coverages you’re getting. Be especially cautious of
insurance that’s oered through unsolicited e-mails.
• Keep your insurance documents. In addition to the actual policy, keep
a copy of any correspondence between you and the insurance company,
including advertisements, receipts, and details of any claims submitted.
Also keep notes of any telephone or in-person contacts with the company,
including the name and title of the person you spoke with, the date, and
the details of the conversation. Good recordkeeping may assist you to
resolve any future problems.
• Review all of your insurance documents to make sure they only include
the coverages you purchased. If you do not receive your policy, contact
your agent or the insurance company. In the case of life insurance policies,
make sure it does not include any loans that you have not authorized.
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A CONSUMER GUIDE TO INSURANCE FRAUD
WHAT TO DO IF YOU
ARE INVOLVED IN AN
AUTO ACCIDENT
Automobile accidents are one source of a large number of fraudulent claims. e
following are a few tips to assist you to avoid becoming a victim of these claims.
1. Stop at the scene and call 911 to get help.
2. Gather the following information:
Date & time of the accident
Location
Police dept. responding
Ocer’s name & phone #
Case number Tickets issued
Owner & Driver of Other Vehicle
Address
Phone #
Driver’s license #
Insurance company
Agent’s name
Policy #
Injuries
Driver of vehicle
Address
Phone #
Driver’s license #
Insurance company
Agent’s name
Policy #
Injuries
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Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CONSUMER GUIDE TO INSURANCE FRAUD
Vehicle year, make & model
Vehicle ID
License plate #
Passengers
Number of passengers in the other vehicle
Record the details of each one as best as you can.
Passenger (other vehicle)
Address
Phone #
Injuries
Passenger (other vehicle)
Address
Phone #
Injuries
Passenger (other vehicle)
Address
Phone #
Injuries
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A CONSUMER GUIDE TO INSURANCE FRAUD
Independent Witnesses
Record the details of each one as best as you can.
Witness
Address
Phone #
3. Notify your insurance company of all of the above information as soon after the
accident as possible. Make them aware of any suspicions you may have relating to
the facts of the accident.
4. If someone appears at the scene of the accident and attempts to entice any of
the involved parties into accompanying the individual to an attorney or a doctor,
or furnishes anyone involved with the card of an attorney or doctor, recommending
that the party involved in the accident go to that provider for treatment or
representation, get as much information about that individual as possible. Attempt
to ascertain the license number of the vehicle being used. Anyone who engages in
this type of activity for money, or anyone who pays an individual to engage in this
type of activity may be guilty of a crime.
REPORT
INSURANCE FRAUD
Consumers are encouraged to report insurance fraud activities to the Maryland
Insurance Administration’s Insurance Fraud Division. You need not give your name.
Call 800-846-4069 or le a referral form by mail. e form can be found on our
website at www.insurance.maryland.gov under the Consumers tab.
MIA-IF-1 (11/19)
is consumer guide should be used for educational purposes only. It is
not intended to provide legal advice or opinions regarding coverage under a
specic policy or contract; nor should it be construed as an endorsement of any
product, service, person, or organization mentioned in this guide.
is publication has been produced by the Maryland Insurance Administration
(MIA) to provide consumers with general information about insurance-related
issues and/or state programs and services. is publication may contain
copyrighted material which was used with permission of the copyright
owner. Publication herein does not authorize any use or appropriation of such
copyrighted material without consent of the owner.
All publications issued by the MIA are available free of charge on the MIA’s
website or by request. e publication may be reproduced in its entirety
without further permission of the MIA provided the text and format are not
altered or amended in any way, and no fee is assessed for the publication or
duplication thereof. e MIA’s name and contact information must remain
clearly visible, and no other name, including that of the company or agent
reproducing the publication, may appear anywhere in the reproduction. Partial
reproductions are not permitted without the prior written consent of the MIA.
People with disabilities may request this document in an
alternative format. Requests should be submitted in writing
to the Chief, Communications and Public Engagement at the
address listed below.
200 St. Paul Place, Suite 2700
Baltimore, MD 21202
410-468-2000
800-492- 6116
800-735-2258 TTY
www.insurance.maryland.gov
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INSURANCE ADMINISTRATION
