How Does Cybercrime Lead to Insurance Fraud?

The rate of cybercrimes is increasing, especially amid the COVID-19 pandemic. According to the most recent FBI Internet Crime Complaint Report statistics, there were over 450,000 complaints regarding all forms of fraud filed for the year. This resulted in losses in excess of $3.5 billion, which represents the highest number of cybercrime incidents in a single year.

Cybercriminals are becoming increasingly sophisticated and finding new ways to defraud people. One of the most recent trends in cybercrime is the increase in insurance fraud cases that are committed completely online. It is important that consumers and businesses alike understand how insurance fraud and other cybercrimes are committed so that they can take steps to protect themselves.

What Is Insurance Fraud?

Fraud occurs when a criminal knowingly lies to obtain some benefit, usually of a monetary nation. In the case of insurance fraud, this benefit is of insurance in someone else’s name or a payout on an insurance claim that the insured is not entitled to. For example, health care fraud can be committed when a person lies on an application to secure health insurance. While businesses and consumers can commit insurance fraud to make false claims, cyber insurance fraud usually involves securing insurance or using insurance benefits that the cybercriminal is not entitled to.

Any type of insurance can potentially involve insurance fraud, including:

·        Health insurance

·        Automotive insurance

·        Homeowner’s insurance

·        Business insurance

·        Life insurance

·        Workers’ compensation insurance

·        Unemployment insurance

Why Cybercriminals Commit Insurance Fraud

Insurance fraud can be very lucrative for cybercriminals. They can receive many benefits from committing this type of crime, including:

·        Securing insurance that someone else is paying for

·        Securing insurance that they would not otherwise be eligible to receive

·        Receiving benefits from using the insurance, such as payment for medical procedures

·        Selling fraudulent policies to others

·        Committing account takeover and rerouting communications to secure additional accounts or accessing the insurance account to steal personal information

·        Making claims against the illegally-obtained insurance

Warning Signs of Insurance Fraud

People who are victims of insurance fraud may spot the following warning signs:

·        They receive letters or emails about an insurance policy that you never inquired about

·        They receive bills from medical providers for procedures they did not receive

·        They see suspicious charges or inquiries on their credit report

·        They receive phishing emails directing them to click on a link or make a payment for a service they never received

·        They receive generic emails that do not address them by name and that contain spelling errors and typos

Types of Insurance Fraud

Online insurance fraud may take on many forms, the most common of which are:

·        Account takeover – Cyber Criminals may steal personal information from you by obtaining your login credentials or personal information through phishing emails or other financial scams. They often use social engineering schemes, remote access tools, and malware to commit these scams.

·        Fraudulent policy applications – Criminals may combine false details about a person such as their name, address, or date of birth with a real social security number. They then use this new identity to obtain an insurance policy.

·        Payment hijacking – Cybercriminals who take over the payroll system associated with an insurance product and who change payee information to disburse insurance funds commit a financial scam called “payment hijacking.” This type of fraud reroutes funds that should be paid to a genuine policy holder or third-party provider to the criminal.

·        False insurance claims – Once the criminal has access to the insurance account, they may try to use it to secure medical services or other benefits from it. They may make false insurance claims, such as alleging damage to a vehicle that is covered under the auto insurance policy.

How Identity Theft Can Lead to Insurance Fraud

Many cybercriminals attempt to steal consumers’ identities in order to hack into their accounts and access funds. However, identity theft can also lead to insurance fraud when the criminal uses the victim’s benefits that they do not qualify for. Today’s digital world is increasingly interconnected, making it easier for cybercriminals to infiltrate multiple accounts and even open new ones. Once a cybercriminal has your information, they can use it to take advantage of your insurance policy.

How to Prevent Insurance Fraud and Financial Scams

There are steps that you can take to prevent the likelihood of becoming the next victim of insurance fraud. Use these tips to stay safe online and offline:

·        Do not provide your insurance information to third parties unless absolutely necessary

·        Do not click on links or attachments in emails from people you don’t know or can’t verify

·        Check your credit report regularly to identify any suspicious activity

·        Secure your physical and digital insurance cards

How Can Insurance Companies Prevent Fraud

There are several steps that insurance companies should seriously consider to fight insurance fraud.

Boosting your cybersecurity probably is the best practice, since most frauds start with data breaching and being able to protect your clients data will definitely have its benefits. One simple thing you can do is ensure that you always have the latest software installed. Anti-virus and anti-spam software is constantly patched to combat new scammer techniques.

Insurance companies should also consider investing in Identity management (also called identity access management) which will make sure that the beneficiary person is not subjected to Identity theft.

It’s definitely best if you have a specific member of staff (or contractor) accredited with the specialized skills required to detect, investigate and deter insurance fraud.


Because cybercriminals are actively waiting for security vulnerabilities to steal your identity and insurance, it is important that you safeguard your private information. By using the tips above, you can ensure that only you are entitled to your rightful insurance benefits.

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Security and compliance consultant at

David Lukić is an information privacy, security and compliance consultant at The passion to make cyber security accessible and interesting has led David to share all the knowledge he has.

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