Insurance fraud schemes

Insurance fraud is committed by companies, agents, adjusters, doctors, hospitals, or consumers when they lie or misrepresent facts for financial gain.

Because companies spread claim costs among policyholders, fraudulent insurance claims drive up insurance premium costs. 

How to report suspected fraud

If you know or suspect someone has committed insurance fraud, Texas law requires that you report the fraud within 30 days. The law protects you from any retaliation or liability for reporting fraud.

If you suspect fraud or think you have been the victim of insurance fraud, report it to the TDI Fraud Unit .report insurance fraud online or by calling the toll-free Consumer Help Line. To report fraud involving Medicare, Medicaid, or health care or drug discount programs, call the Texas Attorney General’s Consumer Protection Hot Line. ) at 800-621-0508.

Insurance fraud schemes

Insurance without a license

It is illegal to sell insurance in Texas without a license. (The one exception is for surplus lines companies, also known as offshore insurers, which are out-of-state companies that insure unusual or hard-to-allocate risks. Surplus lines or offshore companies must still register with TDI to operate in Texas and must be licensed in their home state or country).

Unlicensed companies often don’t meet the state’s minimum financial requirements and may not have the money to pay claims. The company will collect your insurance premiums and may even pay some small claims so that you continue to pay your insurance premium. Then, when you have an expensive claim, the company could disappear, leaving you with no coverage and expensive bills to settle.

Consumers and small businesses that have difficulty finding or affording insurance may be vulnerable to these schemes.

Prevention tips:

Make sure your agent or company is licensed or registered to sell insurance in Texas. If you have health coverage through your employer, especially if you work for a small employer, it’s still a good idea to make sure your insurance company is licensed. You can find out the status of the agent’s or company’s license by calling the Texas Department of Insurance (TDI) Consumer Help Line at 800-252-3439 or you can review the company’s profile on our website.

When checking a company’s license status, make sure you know the exact name of the company. Unlicensed companies often use names similar to the names of licensed companies. If you find even a slight difference between the name provided to you by the company and the name on TDI’s records, please notify TDI immediately.

Medical Provider Fraud

Doctors and hospitals commit fraud when they overcharge insurance companies for services they provided, charge for services they did not provide, or perform tests and procedures that are not necessary.

Prevention tips:

  • Ask questions to make sure the treatment your doctor recommends is necessary.
  • Be careful if your doctor recommends a new, unusual, or experimental procedure.
  • Review your bills and your insurance company’s Explanation of Benefits (EOB) statement to make sure you were billed only for the services you received. If you find a difference between the bill and the services you received, contact your insurance company.

Car accident fraud

People commit car accident fraud when they increase their claims or when they file claims for accidents or thefts that never happened. Another scheme is to cause a crash and make it look like it’s your fault.

One of the most common types of schemes is called “swoop and squat”. This scheme involves two people acting together in two separate vehicles. The braking (“squat”) car moves directly in front of you and begins to slow down. The passing car (“swoop”) comes up behind and cuts off the braking car in front of you. The squat car brakes quickly, forcing you to the rear end, while the car you passed takes off.

Prevention tips:

  • Insist on calling the police if you are involved in an accident.
  • Get the other driver’s information. Be sure to get the name, address, phone number, license plate number, the exact name of the insurance company, and the policy number.
  • Ask for the names of everyone in the other vehicle.
  • If you have a camera or cell phone with a camera, take pictures of the damage to your vehicle and the damage to the other vehicle.
  • Do not follow other cars too closely. This will help you avoid the swoop and squat.
By Cary Grant

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