COVID-19-related frauds. Fraud fighters are ramping up for a surge in insurance scams. A new norm of business shutdowns, dwindling personal savings and a free-falling economy may cause decent Americans to cheat their insurer for a fast cash infusion. (Photo: Shutterstock)

Americans are reeling from the shock of COVID-19. The pandemic could last for months. If it does, the financial damage to millions of consumers and businesses across the nation will rapidly accelerate.

As personal savings dwindle and falling profits push businesses toward bankruptcy and lower than expected earnings, many good American citizens and corporations could make bad decisions to seek rapid payouts through insurance scams.

It happened during the crash of 2008-2010 — waves of schemes surfaced by desperate Americans who lost their savings and saw no other way out.  Vehicle torchings, home or business arsons, and other insurance crimes rapidly spread.

Consumer complaints against insurers also surged. Insurers came out of the “Great Recession” with plans to cut staffing and outsource services. They also deployed new algorithms for everything from better appropriate fraud detection to inappropriate premium-optimization schemes. The race was on to return to high corporate profits.

Forward-thinking fraud fighters are already ramping up plans for a similar scam surge. If we face a lengthy new norm of business shutdowns, dwindling personal savings, and a free-falling economy, then many decent Americans may cheat their insurer for a fast cash infusion.

False claims may seem a justifiable lifeline against bankruptcy, losing their home or business, and throwing their family or employees onto the streets. Insurers equally owe a high duty to policyholders in these increasingly financially difficult times. Insurers need adequate staffing to handle and investigate claims, reach correct coverage decisions. Importantly, they must balance their own need for financial returns in a fair and equitable manner.

Beware of the scammers

Following are just some of the potential scams fraud fighters could confront if the financial shockwaves reach critical mass. Equally important, there are planning steps insurers must consider to keep the potential pandemic of false claims at bay. Click here for regularly updated scam and trend information.

Vehicle scams

Give-ups. Fake thefts and torchings of late-model vehicles could spike as drivers go underwater with payments. Expensive SUVs that soak up gasoline will be disposable. Same with hybrids bought during flush times. Not to mention second family cars that suddenly seem non-essential, especially if the new reality is more persons working remotely from home rather than commuting to offices.

Vehicles are relatively easy to make disappear. Unloading these commodity items is not as big an emotional shock as burning your home. Vehicle give-ups thus could be among the first wave of desperation scams by ordinary Americans.

Sudden disappearances from grocery-store parking lots or in front of homes could start mounting. Burned-out hulks may show up on rural roads, woods or dark city streets. Vehicles will join the fish in lakes, rivers and canals. The deserts outside of Las Vegas were mass graveyards of burned SUVs in 2008-2010. Many more such vehicles are on the roads today, creating an increased fraud risk in uncertain economic times.

Entrepreneurs even could advertise, promising a fast and safe disappearance of vehicles so drivers can make false theft claims. Crooked body shops might help total cars or inflate damage, for a fee.

Organized auto schemes. The criminal element likely will seek to cash in as well. Organized rings might put the word out that they’re in business. Why not stage collisions with your unwanted late-model SUV and another vehicle? Your vehicle is totaled, giving you a nice income boost from fake injury claims.

Organized crash rings may launch waves of fake whiplash claims, testing how insurer anti-fraud systems cope during the pandemic. The onrush of telemedicine to substitute for in-person medical exams could allow rings to mass-produce whiplash claims.

Many staged crashes could be launched by individual drivers and small- business owners looking for a quick “collision by collusion” to cover expenses or bills. Identifying the connection between friends, neighbors or business associates may be hard to detect. This would raise the question of whether insurers are properly staffed with investigators to identify such scams. Failing to do so may help drive up auto premiums for years to come.

Home arsons

Homeowners may torch their homes if mortgages become un-payable. Frying chicken and lit candles could be among the standard policyholder excuses.

Sudden increases in policy limits by homeowners without the income, lifestyle or possessions to support the coverage could be among the flags. Homes may burn just days or weeks after new policy limits take effect, or just before a foreclosure is scheduled.

Targeted torchings of garages, kitchens or other smaller home areas might offer an income boost without raising suspicions that burning your entire home might arouse. Since 2008, many Americans, feeling a new economic well-being, also have purchased — and perhaps over-mortgaged — second homes, which may now be viewed as a disposable luxury no longer needed.

Medical & injury scams

Shuttered clinics may make inflated claims for real and phantom treatments to keep revenue flowing. Billing records may need to be carefully reviewed in comparison to mandatory closures, travel restrictions, or other similar COVID-19-related impacts to determine if services were actually rendered. Medical providers teetering on the edge of failure will be equally tempted to create an outflow of false claims, up-charges for treatments, or generate income from unnecessary or duplicative services.

As with fake whiplash claims, telemedicine could be exploited to mass-produce false claims. With calls for telemedicine to be expanded rapidly, expect an equal rise in those seeking to commit scams as new systems may be rolled out before adequate safeguards are in place.


With thousands of firms already shuttered indefinitely and watching their profits evaporate, some anxious owners will look for ways out as bankruptcy approaches. Firms that may have less-than-stellar business interruption coverage may be especially amenable to making a fast insurance claim for financial gain.

Arsons could be part of the commercial scammer’s playbook. So could staged inventory thefts, delivery hijackings, water damage or inventory spoliation.

Firms with unaffordable vehicle fleets may start reporting sudden thefts or collisions, especially smaller firms with modest though expensive delivery trucks or vans. Staged crashes could generate income, including bloated injury claims.


The good times gave many consumers spending money to buy luxury toys. Boats, motorcycles, RVs, snowboards, expensive watches, jewelry, audio and video systems and other lifestyle bling. These luxuries could be the first to go. Setup thefts, boat sinkings, fires and other mysterious losses could swiftly mount.

Improvements in seeking new scheduled item coverage, deductibles or coverage limits just before the claims could be scam giveaways.

Workers’ comp: fake injuries

Impending layoffs could invite anxious employees to set up fake or inflate workplace injuries just ahead of the pink slip. They can fabricate new injuries — or take care of pre-existing non-work injuries such as that wrenched knee that never fully healed after last fall’s weekend soccer game.

Expect an onslaught, as well, of potential claims never before seen in workers’ compensation. With employees ordered to work remotely from home, what is the new definition of a “workplace injury”? May an employee who trips on their rug at home while trying to get to a phone call or computer screen now claim they were injured “on the job”? Such claims, no doubt, will arise. Most will have no witnesses, surveillance cameras or other independent proof to determine if they are legitimate.

Exploiting workers’ comp could be especially appealing if an employee’s loaded comp coverage is better than their personal health plan. A big unknown will be how America’s health insurers themselves weather this crisis and their financial viability in a post-COVID economy.

Workers’ comp: premium scams

Financial stress could impel more businesses to lowball their payroll and staff size. Permanent and part-time layoffs regretfully will increase — possibly for months to come.

Falsified layoffs thus could seem more-plausible to workers’ comp insurers amid the turmoil, and thus easier to disguise and get away with.


Numerous purely health-insurance scams could surface within days or weeks. These will be the first wave. Fake “corona insurance” is one possible ruse. Cheaters will go after Medicare beneficiaries, selling bogus testing kits and miracle cures to steal seniors’ Medicare information and other personal identifiers.

The Coalition is seeing the first warning signs. Such cons may accelerate as the criminal element latches onto new ideas for defrauding anxious Americans. Look too for the loosened oversight rules on healthcare plans enacted last year. With no accompanying funding to states to investigate fraud, this could be a potentially fertile ground for scammers to exploit consumers who need healthcare coverage at a cheaper price.

Duty to defend

Expect a major increase in duty-to-defend requests involving individual and class-action lawsuits from COVID-19 exposures. Class action lawsuits are already being filed. They allege businesses failed to do enough to protect employees and consumers from exposure. Suits against hand sanitizer manufacturers claim they implied their products protected against COVID-19.

Expect more lawsuits to explode in the coming months. Some may be justified, but others may be nothing more than quick money grabs. Regardless, insurers will be asked to incur legal fees to defend these cases, seek coverage opinions, and perhaps make large unexpected payouts.

Planning downstream

The potential for a surge of false claims is placing fraud fighters on high planning alert — with the hard lessons of 2008 in mind.

Analytics. Are insurers fine-tuning their analytics to more-accurately flag and weigh indicators of likely corona-related opportunistic scam claims?

Distance investigating. The isolation of so many investigative, adjuster and claims staff may complicate investigations that normally require personnel on-site, such as vehicle crashes or home fires.

How will both insurers and outsourcing companies adapt if fewer investigators and adjusters are available for crucial onsite work? Will this require more claimant phone interviews and reliance on photos or videos in place of onsite legwork? Will tech-savvy policyholders increase their use of altered damage photos for personal gain?

Vendors. Are insurer vendors prepared for sudden claim surges? Will they have staff and other resources to handle increased claim volume while dealing with potential quarantined staff working remotely instead of in the field? Do vendors have credible continuity and disaster plans to keep investigations flowing during emergencies?

Many good companies provide the option of outsourcing these services, but those high-quality vendors may quickly be overworked. Should that occur, be aware of new companies springing up that may not be as qualified or ethical.

Reputation at stake. Insurers also could face a reputational challenge. They must show compassion in rapidly paying claims of anxious policyholders — even suspect claims — while still showing vigilance against fraud.

Battles are already on the horizon concerning claims for business interruption coverage. Many business owners feel they may be entitled to coverage. Major insurance organizations are warning that things such as COVID-19 are excluded. In some states, lawmakers are calling for legislation requiring mandatory payments by insurers regardless of policy language.

An insurer’s reputation can be quickly boosted or damaged by its COVID-19 response. Much depends on how people perceive their insurer treats them during times of urgent personal need. Many insurers rapidly pay claims upfront during natural disasters, then chase the suspect ones. Insurer decision-makers will need a thoughtful strategy to strike the right balance.

Similarly, how do we urge people to stay honest in our public messaging? Fraud fighters must avoid the appearance of being hard-hearted and mistrustful while Americans go through such great personal struggles.

Wider collaboration. Much also depends on how fast and fully the anti-fraud community collaborates. State insurance departments, insurers, IASIU, NICB, the Coalition, and other organizations will need to continually share information — as much and as fast as possible. Are the systems in place to identify trends, possible crime rings and other vital information and scam leads?

We already knew insurance fraud was expanding to worldwide platforms. A worldwide pandemic may be the first evidence we see of large-scale global insurance fraud schemes arising from this virus.

Americans are linking arms to stifle a vicious microbial attack, the likes of which we’ve rarely seen in modern history. We will succeed by pulling together.

The anti-fraud community is mobilizing to prevent a potential pandemic of claim fraud. With the right planning and vigilance, fraud fighters also will succeed. We must work cooperatively to make sure insurers, consumers, and everyone involved in the insurance process is held to the highest ethical and moral standards.

We must unite to battle insurance fraud with the same vigor needed to fight this pandemic itself. We may not be able to fully control COVID-19 at this point. But the steps fraud fighters take now may help prevent a potential insurance-fraud pandemic.

Matthew J. Smith, Esq., is executive director of the Coalition Against Insurance Fraud.