Insurance fraud can affect anyone with an insurance policy and is considered a serious crime. The National Association of Insurance Commissioners revealed that property and casualty insurance fraud costs insurers $45 billion per year, with auto theft fraud totaling $7.4 billion annually. However, insurance carriers are not the only ones who bear the costs of insurance fraud. According to the Federal Bureau of Investigation, the average family pays between $400 to $700 a year in increased premiums due to added costs incurred due to insurance fraud, making this a significant problem for everyone.

The issue of insurance fraud is pervasive and is committed by a wide range of consumers who likely don’t consider themselves “criminals.” A recent survey by the Coalition Against Insurance Fraud and Verisk, a data analytics and risk assessment firm, found that “Across all demographics, more than 60% of all respondents feel they stand a better than 50/50 chance of getting away with their insurance crime.”

According to a recent article about the Coalition’s survey in the insurance trade publication, Carrier Management, survey data suggests that younger Americans are more accepting of insurance fraud. The article explains, “while most older respondents consider insurance fraud a crime, only 75 percent of those under age 45 feel the same way.” The survey also found that younger respondents were more likely to commit insurance fraud because they felt that it was “not on a par with other crimes such as theft or even tax evasion,” and that it was unlikely that they would get caught committing insurance fraud.

Because insurance fraud is largely considered acceptable, insurance carriers must continuously improve their fraud detection and prevention strategies to stay ahead. This includes adopting new technologies and educating their employees in fraud tactics to identify fraud early.


What Is Insurance Fraud? 

There are two categories of insurance fraud: “hard fraud” and “soft fraud.” Hard fraud is when a policyholder deliberately causes damages with the intention of collecting from the other driver’s insurance policy. Soft fraud involves a policyholder exaggerating a claim, lying about personal or vehicle information, or intentionally falsifying an application form to pay a lower premium. This type of fraud is more common and is often seen as a crime of opportunity, committed when the perpetrator sees a chance to commit an act, rather than planning the crime ahead of time.

Examples of Auto Insurance Fraud Tactics:

Arson for Profit – The covered vehicle is intentionally set on fire by the policyholder or someone acting on their behalf to collect insurance money.

Exaggerated Claims – Those involved in a legitimate accident inflate their injuries or damage to a vehicle to collect extra money.

Drive-Down – A driver waves on another driver to proceed then intentionally hits the passing car.

Hit & Run – The policyholder uses a pre-damaged vehicle and claims it was involved in a hit-and-run.

Sideswipe – A driver in the inside lane of a dual turn lane drifts into the outer lane, intentionally forcing a collision.

Swoop & Squat – A coordinated scheme where two vehicles work in tandem to cause an accident with a third vehicle. One of the fraud vehicles makes an abrupt lane change (“swoop”) in front of the second fraud vehicle, causing it to brake suddenly, or “squat.” As a result, the insured vehicle cannot avoid a collision with the “squat” car’s rear end. The front “swoop” car typically never will be seen again. The “squat” car driver will submit a claim against the third driver’s insurance for their vehicle damage and bodily injuries.

Jump In – When individuals who were not occupants in any of the vehicles involved in an accident claim that they were occupants of one of the vehicles and were injured in the incident.

Falsifying an Accident Date or Accident Circumstances – This covers several types of fraudulent activity related to providing false information related to a claim. Individuals may falsify an accident date so that it appears an incident occurred at a time when policy coverage was in force. If an excluded driver was operating a vehicle during an accident, the claim may be submitted showing a different covered driver operating the vehicle in an attempt to get the insurer to cover damages.

Rate Evasion – When false residential information is intentionally provided on an insurance application in order to receive a lower premium rate.


How Maryland Auto is Combating Fraud

Maryland Auto takes insurance fraud seriously and incorporates measures to prevent paying fraudulent claims.

Our systems can detect and flag potential fraudulent claim indicators. Alerts are placed on claims to make claims employees and management aware when there is a potential of fraud to prevent accidental payments being made on fraudulent claims.

Maryland law limits eligibility for coverage with Maryland Auto to Maryland residents only. Often, residents of other states where rates may be higher, falsify their residence information to apply for and purchase Maryland Auto policies. Maryland Auto relies on a network of Vehicle Tag Locators to investigate claims where residency may be an issue in order detect if a vehicle is primarily operated in Maryland or out of the state. We also have a dedicated Special Investigations Unit responsible to further investigate and resolve those suspicious claims that have been identified with potential fraudulent claim indicators.

Our Claims professionals also receive regular training to sharpen their skills and keep them aware of any claim situations that may indicate fraud. In addition, training is offered to our authorized producer partners (agents) to help them identify and prevent fraud before a policy is written or a claim is submitted.


What Happens if You’re Caught Committing Insurance Fraud?

Perpetrators of insurance fraud face both criminal and civil penalties. The Maryland Insurance Administration explains that, “Fraudulent acts where the value is $300 or more is a felony; if less than $300, it’s a misdemeanor. In addition to criminal penalties, the Maryland Insurance Administration may impose civil administrative penalties not exceeding $25,000 for each act of insurance fraud.”


How to Report Insurance Fraud

Contact the Insurance Carrier – Reach out to the insurer who you think is being defrauded.

  • Maryland Auto can be reached by phone at 800-492-7120 or by completing a contact form.

Maryland Insurance Administration’s Insurance Fraud Division

  • Call 1-800-846-4069
  • Complete this form and fax to 410-347-5350 or email to

National Insurance Crime Bureau (NICB)

  • Call 1-800-835-6422

Federal Bureau of Investigation (FBI)

  • (410) 265-8080

For more information about insurance fraud:


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