Auto insurance fraud has been a consistent concern for the insurance industry. Fraudulent claims cost insurance companies more than $300 billion annually, and those expenses are often passed down to consumers in the form of higher premiums.
Not only is insurance fraud becoming more common, but it’s also getting more sophisticated, with cases ranging from staged animal attacks to elaborate crash schemes. In this article, we’ll analyze some of the latest insurance fraud trends and share tips for protecting yourself.
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- Fraudulent insurance claims cost businesses and consumers roughly $308 billion each year.
- Staged crashes – one of the most common types of insurance fraud – are up 18% year-over-year.
- Artificial intelligence and machine learning enable insurers to analyze large amounts of historical claim data and identify fraud patterns much faster than a human.
The bear costume case: A bizarre attempt at insurance fraud
In January 2024, four Los Angeles-area men were driving in Lake Arrowhead, when a bear got into their 2010 Rolls Royce Ghost and damaged the inside of the luxury vehicle. The men gave video footage to their insurance company showing the bear inside the vehicle.
When the insurer reviewed the footage, however, it found that the “bear” inside the vehicle was actually a person wearing a bear costume. The insurance company even consulted with the California Department of Fish and Wildlife to confirm their findings. And it gets worse: detectives found the bear costume in one of the suspect’s homes during a search.
The investigation revealed that this wasn’t an isolated incident. The men had filed two other insurance claims, with two separate insurance companies for the same date and location, for two other luxury vehicles. The bear costume was used again to stage a fake claim, and footage was given to the other two insurers.
The four men were arrested and charged with committing fraud. As a result of this elaborate scheme, the insurance companies involved were defrauded of $141,839, according to the DOI.
While this incident might seem far-fetched, it’s just one example of fraudulent insurance claims involving luxury vehicles. Because luxury cars have high repair and replacement costs, many fraudsters are filing false claims on high-value cars to maximize their payout.
Of course, insurance fraud has serious consequences. It’s a criminal offense in all 50 states, punishable by misdemeanor or felony. In addition to hefty fines and potential restitution, individuals convicted of insurance fraud can also face jail time.
Staged accidents: A persistent and evolving threat
Staged crashes are one of the most common types of insurance fraud. Recent statistics show an 18% year-over-year increase in staged accidents.
According to the National Insurance Crime Bureau (NICB), staged accidents occur mostly in urban centers where there’s a high concentration of vehicles, and in wealthy areas, where fraudsters suspect drivers have better insurance carriers.
The NICB also finds that criminals often go after new vehicles, rental vehicles and commercial vehicles, which tend to have the most coverage. Women driving alone and seniors — two groups that are thought to be less confrontational — are most likely to be victims of these schemes.
There are a few different types of staged accidents that criminals typically cause:
- Swoop and squat: This scheme involves three cars, two driven by criminals and one driven by an innocent person. The person driving the “squat” car pulls in front of the victim’s car, while the driver of the “swoop” car pulls in front of the squat vehicle. The driver of the squat car has to hit the brakes, and it causes the victim to rear-end the squat vehicle. Because the victim is at-fault, they have to cover the criminal’s vehicle damages and injuries.
- Right turn drive down: You stop at an intersection and get ready to turn right. As you start to turn, another vehicle suddenly runs into the back-left side of your car. The driver and their passengers in the other car claim that you turned right when the intersection wasn’t clear, and they all have injuries. In this scheme, the other driver can file a claim with your insurance company and get compensated for their “medical bills.”
- Panic stop: In the panic stop scheme, a vehicle full of passengers drives behind a victim’s car. A passenger watches for signs that the victim is distracted, and at the right moment, alerts the driver to immediately step on the brake. This causes the victim to rear-end the criminal’s car. The driver and passengers claim to be injured, and are able to collect money from the victim’s bodily injury liability insurance policy.
False injury claims: Exploiting the system for financial gain
Fraudulent insurance claims aren’t limited to auto insurance. Commercial insurance, like workers’ compensation, is also exploited by criminals for financial gain.
In 2022, a Southern California police officer received a minor head injury while arresting an uncooperative individual. She reported feeling dizzy and had a headache after the incident, but was cleared by a doctor. Three days after the initial injury, she was diagnosed with a severe concussion.
After receiving her medical diagnosis, she was placed on total temporary disability leave under the department’s workers’ compensation insurance. This allowed her to receive her full salary for up to a year. In the year she collected disability, the officer ran two 5K races, played golf, went snowboarding, attended a music festival and did other physical activities, despite her condition.
Ultimately, the officer received more than $600,000 from the department’s workers’ compensation policy, which included her full salary and medical expenses. Now, she’s facing 15 felonies for workers’ compensation and insurance fraud. If convicted, she could face up to 22 years in prison.
Not only do fraudulent insurance claims cause huge financial losses for insurance companies, but they can also impact insurance premiums for consumers. Insurance companies are often forced to raise rates to offset their losses and stay profitable, even for customers who haven’t filed insurance claims themselves.
The financial impact of auto insurance fraud
Auto insurance fraud has major financial consequences for insurance companies and policyholders. Data from the Coalition Against Insurance Fraud found that fraud costs businesses and consumers roughly $308 billion each year.
According to the coalition, the biggest drivers of annual insurance fraud include:
- Life insurance: $74.7 billion
- Medicare: $60 billion
- Property and casualty insurance: $45 billion ($7.4 billion for auto theft)
- Health insurance: $36.3 billion
- Workers’ compensation: $34 billion ($9 billion from premium fraud and $25 billion in claims fraud).
How do these costs affect consumers? The FBI has estimated that insurance fraud costs the average family anywhere from $400 to $700 per year in premiums.
“In the 2025 LexisNexis Risk Solutions Cybercrime Report, there were 12,000 confirmed fraud attempts aimed at insurers across all lines of business in the first half of 2024. LexisNexis Risk Solutions also found that 3.5% of new account creation transactions and 1.2% of login transactions were human-initiated attacks or fraud,” says Kim Brown, associate vice president of product management for identity access management at LexisNexis Risk Solutions.
The report determined that human-initiated fraud — as opposed to bot fraud — had increased 16% year-over-year across all industries, including insurance.
Because fraudsters are getting more sophisticated, it’s not easy for insurance companies to detect fake claims. Criminals have mastered elaborate practices, like using AI to generate documents that look legitimate, that make it difficult to easily spot fraud. Plus, many insurance companies have limited resources for investigating fraud.
Technological advancements in fraud detection
Despite the rapid increase in insurance fraud over the last several decades, many insurance companies are turning to technology to identify fraud and catch fake claims.
Artificial intelligence (AI) and machine learning are two of the most promising advanced technologies for fraud detection. These tools enable insurers to analyze large amounts of historical claim data and identify patterns of fraudulent activity much faster than a human could.
Another tool that’s being used to detect fraud is predictive analytics, which uses algorithms to spot anomalies when processing claims. For example, it can be used to find repeat claims from the same person, unusual claim timing (like the day after a policy is opened) or inconsistent information between documents.
To combat insurance fraud, many insurance companies are implementing special investigative units (SIUs) with trained insurance fraud professionals who investigate suspicious claims and work with law enforcement to prosecute fraudsters. The NICB also collaborates with law enforcement agencies and prosecutors to investigate fraud and charge criminals
Protecting yourself from auto insurance fraud
As a consumer, recognizing and avoiding common scams can help protect you from auto insurance fraud. Educate yourself on popular fraud tactics and report suspicious activity to your insurance company. For instance, you should always avoid tailgating other drivers so it’s harder for fraudsters to force you into a staged collision.
When you’re shopping for insurance, make sure you’re purchasing a policy from a licensed agent at a legitimate insurance company. You can check with your state’s department of insurance to verify that the insurer and agent are both licensed in your state.
If you need to file a claim, it’s important to keep all your documents and receipts, and avoid giving your personal information to unknown people. For example, if you hit another driver and they ask for your Social Security number, don’t give it to them — it’s not a requirement for filing an insurance claim.
If you get into an accident, make sure to take photos of the damage to your vehicle and the other person’s vehicle, and write down what happened, where it happened, and how many passengers were in the other person’s car. It’s always best to call the police and file a police report, even if the accident was minor.
Learn more: Install a dash cam to mitigate fraud.
FAQs about auto insurance fraud
What are the most common types of auto insurance fraud?
Some of the most common types of auto insurance fraud are staged accidents, filing claims for damage that doesn’t exist and providing false information on insurance documents.
How does insurance fraud affect my premiums?
Insurance fraud can cause your car insurance premium to increase. When insurance carriers are paying out fraudulent claims, it impacts their bottom line. To remain profitable, insurers are sometimes forced to raise premiums for policyholders.
What should I do if I suspect fraud?
If you suspect insurance fraud, you should contact your car insurance company right away. You can also report fraud to the NICB and the National Association of Insurance Commissioners (NAIC). Additionally, most state insurance departments have a fraud bureau that takes complaints from consumers.
Resources & Methodology
Sources
- California Department of Insurance. “Four arrested after videos show fake bear attacks for insurance payouts.” Accessed July 2025.
- National Association of Insurance Commissioners. “Insurance Fraud.” Accessed July 2025.
- National Insurance Crime Bureau. “Staged Auto Accident Fraud.” Accessed July 2025.
- National Association of Insurance Commissioners. “Insurance Fraud.” Accessed July 2025.
- Office of the District Attorney, Orange County, Calif. “Orange County News.” Accessed July 2025.

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