Insurance Fraud Is No Joke—Academy Paper Highlights Its Serious Impacts

By Rob Fischer, Policy Project Manager, Casualty 

Sometimes we hear about something happening that we know is wrong, but is so ridiculous that we overlook who is at fault and the possible consequences of their actions. 

For example, one of the most incredulous and memorable stories that came across my news feed in 2024 was an insurance fraud ring in California that damaged luxury cars and then filed three false insurance claims for more than $140,000 each. What made this incident stand out was that the alleged fraudsters damaged the cars while wearing a bear costume. They submitted an incredible video of the incident as evidence with their insurance claim, which according to a California biologist was “clearly a human in a bear suit.” 

While this incident in a vacuum just seems silly, it is only one case of a widespread issue that causes a lot of strain on the insurance marketplace and affects the lives and wallets of consumers.   

According to the National Association of Insurance Commissioners (NAIC), “insurance fraud occurs when an insurance company, agent, adjuster or consumer commits a deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling, or underwriting insurance.”  

There are countless different types of fraud schemes committed by bad actors, including claim fraud, premium fraud, and insider/agent fraud. Criminals are always coming up with new ways to defraud the insurance system, so regulators and law enforcement agencies must be ever-vigilant as fraudsters change and adjust their tactics.  

The Academy’s P&C Committee on Equity and Fairness recently published an issue brief about insurance fraud and the common victims of fraud. As the issue brief discusses, many fraud victims are some of the more vulnerable members of society, who are already under economic stress, may struggle with insurance affordability to begin with, and/or struggle with cultural or language barriers.  

The issue brief discusses the role of actuaries in quantifying fraud, but other ways to become more aware and educated on the broader issues surrounding fraud include following the activities of the NAIC’s Antifraud Task Force, the National Coalition Against Insurance Fraud, the National Insurance Crime Bureau, and your state’s law enforcement agency that handles insurance fraud. Consumers may think fraud is no concern to them if they follow the law, pay their bills on time, and engage in low-risk behaviors. However, insurance fraud negatively affects all stakeholders in the insurance system, including consumers, whether or not they’ve committed fraud or had fraud committed against them. 

Insurance is risk pooling. When bad actors defraud insurers against the pooled capital, consumers end up paying more in premiums. It’s in everyone’s best interest to oppose fraud and report it to law enforcement whenever possible. While silly news stories about people dressing up as bears to trick an insurance company may seem funny in the moment, it’s important to remember that the consequences of such actions can have serious impacts on our communities and on the industry.  Let the bears stick to reminding us how to prevent forest fires—not be used as a means to steal money and put affordable insurance coverage further out of reach for those already struggling to make ends meet.