Glossary

Insurance fraud

Deceiving an insurer, or a policyholder, for financial gain, from staged crashes and padded claims to fake policies and lies on applications.

Also called: auto insurance fraud, car insurance fraud

Insurance fraud is any intentional deception in buying, selling or claiming on insurance to get money or a benefit the person is not entitled to. Most people think of policyholders cheating insurers, but fraud also runs the other way, through fake agents, unlicensed sellers and scams aimed at drivers.

In auto insurance, schemes fall into two broad groups. hard fraud is planned: staged crashes, false theft reports, burned or dumped cars, and medical or repair billing for work never done. soft fraud is opportunistic: padding a real claim, adding old damage to a new one, or misstating where a car is kept, who drives it or how far to get a lower premium. Fraud aimed at consumers includes ghost broking, fake insurance cards, towing and body shop scams, and phishing messages that imitate insurers.

Insurance fraud is a crime in every state, and many states run fraud bureaus that investigate it. Insurers use special investigations units and share data through the National Insurance Crime Bureau. Fraud raises premiums for everyone, because insurers build its cost into rates. To protect yourself, buy only from licensed insurers and agents, answer applications truthfully, and report suspected fraud to your insurer, your state fraud bureau or NICB.

Last reviewed October 4, 2026

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Related terms

Hard fraud Deliberately staging or inventing a loss, such as a fake crash, arson or false theft report, in order to collect insurance money. Soft fraud Opportunistic insurance fraud by otherwise honest people, such as padding a real claim or giving false details to lower a premium. Staged accident A crash deliberately caused or faked to file fraudulent insurance claims, often by organized rings of drivers, passengers and complicit providers. National Insurance Crime Bureau (NICB) A nonprofit funded by member insurers that investigates insurance fraud and vehicle theft, works with police and runs the free VINCheck lookup. Special investigations unit (SIU) The team inside an insurance company that investigates suspected fraud in claims and applications and refers cases to authorities. Ghost broking A scam in which someone poses as an insurance agent and sells fake, altered or fraudulently obtained policies, often at too-good-to-be-true prices.

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