The FBI lists the following common insurance fraud schemes in its Insurance Fraud Report at https://www.fbi.gov/stats-services/publications/insurance-fraud :

Premium Diversion

Premium diversion is the embezzlement of insurance premiums.
It is the most common type of insurance fraud.
Generally, an insurance agent fails to send premiums to the underwriter and instead keeps the money for personal use.
Another common premium diversion scheme involves selling insurance without a license, collecting premiums and then not paying claims.

Fee Churning

In fee churning, a series of intermediaries take commissions through reinsurance agreements.
The initial premium is reduced by repeated commissions until there is no longer money to pay claims.
The company left to pay the claims is often a business the conspirators have set up to fail.
When viewed alone, each transaction appears to be legitimate—only after the cumulative effect is considered does fraud emerge.

Asset Diversion

Asset diversion is the theft of insurance company assets.
It occurs almost exclusively in the context of an acquisition or merger of an existing insurance company.
Asset diversion often involves acquiring control of an insurance company with borrowed funds. After making the purchase, the subject uses the assets of the acquired company to pay off the debt. The remaining assets can then be diverted to the subject.

Workers’ Compensation Fraud

Some entities purport to provide workers’ compensation insurance at a reduced cost and then misappropriate premium funds without ever providing insurance.

Massive Storm, Massive Cost

In late August 2005, Hurricane Katrina made landfall along America’s Gulf Coast.
The storm caused approximately $100 billion in economic damages.
Approximately 1.6 million insurance claims were filed, totaling $34.4 billion in insured losses.
Of the $80 billion in government funding appropriated for reconstruction, it is estimated that Insurance Fraud may have accounted for as much as $6 billion.

Disaster Fraud Schemes

False or exaggerated claims by policyholders.
Misclassification of flood damage as wind, fire, or theft.
Claims filed by individuals residing hundreds of miles outside the disaster-zone.
Bid-rigging by contractors, falsely inflating the cost of repairs.
Contractors requiring upfront payment for services, then failing to perform the agreed-upon repairs.
Charity fraud scams designed to misappropriate funds donated for disaster relief.

The Government Response

On September 8, 2005, the Attorney General created the Hurricane Katrina Fraud Task Force (HKTF).
The HKTF was designed to deter, investigate, and prosecute disaster-related federal crimes.
The HKTF has a zero-tolerance policy for fraud related to Hurricane Katrina.
In one Katrina-related fraud case alone, the FBI received more than 70 indictments and over 60 guilty pleas (as of March 2007).

Health Care Fraud

The FBI reports that health care fraud costs the country tens of billions of dollars a year. It’s a rising threat, with national health care expenditures estimated to exceed $3 trillion in 2014 and spending continuing to outpace inflation. Recent cases also show that medical professionals continue, and may be more willing, to risk patient harm in furtherance of their schemes. The FBI is the primary agency for exposing and investigating health care fraud, with jurisdiction over both federal and private insurance programs. We seek to identify and pursue investigations against the most egregious offenders involved in health care fraud through our investigative partnerships with federal, state, and local agencies, as well as our relationships with private insurance national groups, associations, and investigative units. Our field offices proactively target fraud through coordinated initiatives, task forces and strike teams, and undercover operations at https://www.fbi.gov/about-us/investigate/white_collar/health-care-fraud.

FBI Finds Insurance Frauds

Barry Zalma