Louisiana Automobile Theft and Insurance Fraud Prevention Authority James J. Donelon Louisiana Department of Insurance Home Page

Coalition Against Insurance Fraud
International Association of Auto Theft Investigators
National Insurance Crime Bureau
Louisiana State Police

What is Insurance Fraud?

Insurance fraud is the willful abuse of an insurance policy for financial gain. Fraud is an intentional act and is illegal. It includes any deliberate deception perpetrated against an insurance company and any deliberate deception committed by an insurance company or its representatives. Insurance fraud is a problem for both insurance companies and consumers.

Insurance is a vital safeguard in our society and a contract founded on trust. When homes are destroyed, serious illness encountered or accidents happen in the workplace, we trust insurance companies to be there for us. Insurance fraud undermines that trust and hurts those legitimately insured.

Studies indicate 10 percent or more of property/casualty insurance claims are fraudulent. Fraud is the second most costly white-collar crime in America behind tax evasion. Add it all up and insurance fraud costs Americans billions of dollars each year. Not only does fraud cause higher insurance rates, but it also raises our taxes and inflates prices for consumer goods. In 2008, the Coalition Against Insurance Fraud estimated that insurance fraud costs Americans at least $80 billion annually, nearly $950 a year per family.

Insurance cheats range from organized criminal enterprises, to unscrupulous doctors and lawyers, to dishonest body shop operators, and even to your neighbors. Regardless of who they are, insurance criminals are motivated by one thing: money. It´s all about greed and taking what isn´t rightfully theirs.

Types of Insurance Fraud

There are two kinds of fraud – ‘hard’ and ‘soft.’ Hard fraud is a dedicated criminal effort to defraud insurance companies by staging accidents, committing crimes such as arson, or otherwise planning to intentionally commit a crime. While it is definitely out there, this kind of fraud is surprisingly rare when you compare it to ‘soft’ fraud, such as claiming a little more damage on an accident report. Many Louisiana residents aren’t aware that insurance fraud – especially soft fraud – is a crime. Many more think it is “victimless.” No matter what you might think, insurance fraud in all its forms hurts Louisiana as a whole.

If you feel uneasy about any insurance–related transaction, call the Department of Insurance Fraud Unit at 1–800–259–5300. If you don’t want your name used, you can request that your involvement be kept confidential.

Auto Insurance Fraud

Protect yourself by becoming aware of different types of auto insurance fraud, such as:

Fictional Theft – A policyholder files a phony insurance claim for a “stolen” vehicle that he knows is simply in “storage.”

Repair Shop Rip–offs – The owner of an auto repair shop or glass shop offers to inflate a policyholder’s damage estimate as a favor to cover the deductible.

Adjuster Rip–offs – An insurance company directs its adjusters to deliberately limit amounts payable on certain items so that claimants are not properly reimbursed for their losses.

Uncompleted Repairs – The owner of an auto repair shop routinely does not replace parts that are required to complete repairs, or an insurance company requires that substandard work be done by repair shops.

Deceptive Claim – An accident victim files a claim for repairs that had been previously claimed.

Staged Accidents – Beware on the road. Automobile accidents and insurance fraud often go hand in hand. Keep plenty of distance between your vehicle and the one in front it. Avoid “short stops” from the vehicle in front. Often times, the scam is to complain of neck and back injuries. Also beware of drivers who cut into your lane and immediately put on the brakes. The results of these types of scams involve multiple claims against your insurance policy and could involve physicians and attorneys as well.

Producer Fraud – Beware of Schemes

Pocketing Premium Payments – One common insurance scheme occurs when a producer fails to turn over a premium to an insurance company, leaving the customer without coverage. A dishonest producer sometimes gambles that a client won’t have a claim and “pockets” the premium money. You can protect yourself from this type of fraud by paying your insurance premiums by check or money order made payable to the company, not to the producer or agency, whenever possible.

Twisting – Insurance producers usually receive their largest commissions for the first year a policy is in effect, with lower commissions in later years. Because of this, some producers may “twist” the truth and urge you to change policies or companies. This happens most frequently with life insurance policies. However, you should be wary of changing any of your policies because there could be drawbacks.

Stacking – Normally, one policy covers a consumer’s needs in each insurance area. However, for investment purposes some consumers may deliberately decide to buy more than one annuity or life insurance policy. Some producers try to sell you unnecessary multiple policies, claiming that you need extra coverage. This happens most frequently with life or health insurance policies.

Sliding – Sliding occurs when unethical producers try to sell you coverage you either don’t want or don’t need by telling you it is part of a “package.” They may not even tell you about the extra coverage at all. Sometimes producers will “slide” in extra coverage that carries a high commission along with the low commission coverage you are purchasing. The most common kind of items that producers “slide” are accidental death coverage, guaranteed renewable term life insurance or motor club membership.

Churning – Churning occurs when a producer tries to sell an additional policy to a person who already has a policy with a cash value. The producer promises the person a new policy at a low cost. The problem is that the policy costs so little because the rest of the premium is being drawn out of his or her first policy’s cash value. The new policy will eventually deplete the cash value of the first policy. The policyholder will be left trying to come up with money to pay for both policies, or his coverage will lapse.

Other Schemes – Unethical producers sometimes sell fabricated insurance policies, while some claim they represent the federal or state government. Others may use the license of a former or retired insurance producer. Check with the Louisiana Department of Insurance to verify the license of a producer or company by clicking here.

Owner Give-Up – A type of insurance fraud that results in the willful destruction of a vehicle in order to process a claim. This type of fraud is prompted by the economic strain of vehicle ownership during hard economic times. When drivers can no longer afford their vehicle, they resort to extreme measures by arranging for the car or truck to be damaged or stolen. An insurance claim is then submitted for the loss. Not only is the loss fraudulent, but many of these vehicles end up being found by police burned and abandoned. The rationale for the burned state is that it ensures that the vehicle is not going to be repaired and returned to the owner once recovered. Simply put: The owner doesn´t want his car back. He wants the claims payout.

Identity Theft Insurance Fraud

With the ever advancing developments in accessing information on the internet, the interest in our most basic personal information is at an all-time high. Although there are those who still gather personal information by diving through residential and commercial garbage bins, the most frequent attempts to rob one´s identity comes by way of the internet. At an alarming rate, more and more Americans are becoming victims of identity theft. The gathering of names, addresses, birth dates, social security numbers, driver’s license numbers and credit card numbers pose a threat to personal safety.

Too often identity theft turns into insurance fraud when identity thieves use your personal information to purchase automobiles and insurance policies and then file false insurance claims resulting from a staged accident, a false medical claim from the accident, or a false stolen vehicle report. In addition, identity thieves obtain homeowner’s or rental insurance policies with your personal information and submit false claims for burglaries and repairs.

Workers Compensation/Medical Fraud

The most costly and wide–spread types of insurance fraud that plague the insurance industry are worker’s compensation and medical fraud. These types of fraud can range from an employee faking a work related injury to collect benefits to an organized team of corrupt physicians, patients and attorneys that submit inflated or outright false medical claims to insurance companies and Medicare. The complex nature of these types of fraud put the insurance industry, the American public and the health care delivery system at risk.

Fraud Targeting Senior Citizens

Senior citizens are a popular target for insurance fraud. Criminal schemes designed to defraud the individual, the insurance company and the government, have all been committed against seniors. During disasters, crimes most often involve unscrupulous contractors who take advantage of senior citizens who may live alone and are already traumatized by unforeseen circumstances.

Contractor/Disaster Fraud

Hurricanes, tropical storms, hail, floods, earthquakes, tornadoes and lighting strikes all make up natural disasters. Other disasters such as levee failures and oil well explosions are examples of man-made disasters that have an equally damaging effect on communities. Too often, the results of these events are magnified by individuals and companies that take advantage of these bad situations and prey upon people when they are most distracted by what has just happened.

Disaster fraud occurs at an alarming rate. A fraud task force set up after Hurricanes Katrina and Rita received and screened over 26,000 fraud complaints and referred over 17,000 of those complaints to law enforcement agencies for investigation. In the wake of a damaging storm, home repair contractors often go door–to–door offering roofing, siding and repair services. While a majority of the contractors are reputable, there are unscrupulous home repair contractors who prey on consumers who are anxious to get their property and lives back in order.

Don't Be A Victim of Insurance Fraud


  • Do not buy the first policy you find. With most things you buy, you shop around and compare prices and features. Do the same with insurance. Always obtain quotes from several companies and compare benefits and rates before you pay your first premium.

  • Be careful to only buy from authorized companies and producers. Unauthorized insurance operations are illegal, and their policyholders are unprotected if they go broke. You can verify this information by searching for the company or producer in the Louisiana Department of Insurance database by clicking here

  • Be sure to look into the credibility of the producer as well as the company. If the price quoted sounds too good to be true, it probably is. Low premiums do you no good if you receive bad service or the company is unable to cover your claim.

  • Fill out your application carefully. Never sign blank forms or blank applications. Incorrect, incomplete or false information on your application can jeopardize your insurance coverage. It is a crime to supply false information on an insurance application or claim. Don't let a producer convince you to say anything or file information that is not true.

  • Never pay for your premium in cash. Always pay insurance premiums by check or money order. Make sure that you have a receipt that shows that you actually paid the premium. Whenever possible, make your payment to the insurance company, instead of the producer.

  • Expect a copy of your policy from your producer in a reasonable amount of time. (Note: For auto insurance, an ID card is NOT considered a copy of policy.) If you do not receive your policy, contact your producer, and then contact the Louisiana Department of Insurance.

  • Read your policy immediately to verify that it contains the coverage you discussed with your producer. If not, contact your producer immediately or return your policy.

  • Remember there is a free-look period in which you have time to review a policy once you have received it. All life and health policies must have a free-look period of at least 10 days.

  • Keep copies of all insurance records, including copies of all premium payments. Store extra copies in a safe-deposit box, in a waterproof and fireproof container, or with a friend or attorney.

Tips to avoid becoming a victim of staged automobile accident fraud.

  • Avoid tailgating and always give yourself plenty of space between your vehicle and the vehicle in front of you. If you find yourself in an accident, call the police immediately and when the police arrive, obtain a police report or an item number for the report. Exchange contact information with the driver(s) of other vehicles. Make sure you use a current driver´s license to obtain valid information. If the driver(s) refuse, ask the police officer to provide you the contact information of all parties involved.

  • Carry a disposable camera or cell phone with a camera feature to capture the damages to vehicle(s) involved in the accident and to document the number of passengers in each vehicle at the time of the accident. Avoid people at the scene of the accident that are not involved, especially if they are attempting to obtain information regarding whether you have a lawyer or a doctor.

  • If your vehicle requires towing assistance and you have road assistance, make your own arrangements with your company. Avoid tow trucks that happen to show up at the scene offering assistance. If you choose to use a tow truck service that arrives at the scene of the accident, make sure you have a designated repair shop available to receive your vehicle. Do not allow the tow truck operator to recommend a repair shop that you are unfamiliar with.

  • Contact your insurance company or producer as soon as possible to report the accident and to open a claim. Having a copy of the police report or police item number will help expedite the process. Once you have contacted your agent, refer any calls regarding the accident to the person handling your claim.

Here are some suggestions to avoid becoming a victim of disaster fraud.

  • Immediately contact your insurance carrier if you believe your property sustained damage.

  • If you are in need of repairs after a disaster request a list of reputable contractors from your insurance carrier, the Better Business Bureau or a specialized organization. Only work with contractors who are licensed and insured. Ask for a copy of their contractor´s license number and proof of insurance. Make sure the contractor's license is issued in the state that the work is being performed.

  • Contact multiple contractors and obtain more than one estimate. If a price sounds too good to be true, chances are it is not true. Require all estimates in writing on a company's stationery or work order sheet. An estimate should include all materials, labor payment requirements and timetable for completion. If subcontractors are required, they should be listed on the estimate.

  • Be wary of any contractor who uses high pressure sales tactics or discourages you from contacting your insurance company. Do not allow a contractor to inspect your property when you are not home. If you give a contractor permission to inspect your property, watch him conduct the inspection.

  • Request references that include addresses and phone numbers. Once you receive references, use them. Contact the references, inquire about the contractor´s workers, their work schedules, pricing and the quality of the finished product.

  • Read all documents provided by a contractor before signing. If you feel unsure about a contractor, do not sign the contract. If the contractor seems in a hurry to have you sign an agreement and pay the deposit, take additional time to review the scope of the work needing to be performed.

  • Do not give a contractor Power of Attorney over your affairs, or permit a contractor to negotiate or settle your insurance claim.

  • Do not pay a contractor the full amount of the cost of repairs up front and do not sign a completion certificate until all work is completed as indicated in your contract or written estimate. Always pay contractors by check or credit card, rather than in cash, so you have a record of all payments issued.