How to Report False Insurance Claims


Fraud is deceit perpetrated with the expectation of profit or gain. The dictionary definition of the term belies the complexity and magnitude of some fraudulent schemes. Consumers, insurance companies, claims adjusters and contractors all participate in fraud. Consumer-led fraud is perhaps the most egregious form of insurance fraud. Every time a consumer defrauds an insurance agent or company, they make everyone pay higher premiums. Reporting false insurance claims and instances of insurance fraud is imperative to ensuring better coverage for all. 

Types of Insurance Fraud

The most common type of fraud occurs when a consumer files a false claim. Some consumers come up with elaborate schemes to defraud insurance companies and their customers of both money and goods. This costs everyone money and makes everyone, insurance company and consumer alike, a little less wealthy. Inflating damages, filing a claim for an event that never happened and even staging an accident all are tactics used by fraudsters. Some schemes can get very creative. For example, a common scheme is to steal a vehicle by writing a fake insurance check and giving it to the customer. 

Defrauding Government

Hurricane Katrina in 2005 spawned a rash of fake and fraudulent insurance incidences involving the federal government. U.S. attorneys cracked down on people who filed fake insurance claims to the Federal Emergency Management Agency for flood benefits. Several Louisiana residents were charged and faced long prison sentences. Defrauding the federal government is a serious crime. 

Whistleblowing and Reporting False Claims

The False Claims Act, adopted during the Civil War by President Lincoln, enables private individuals to come forward of their own accord and help the government reclaim defrauded funds. The individual, known as a relator, files a "qui tam" lawsuit against the alleged perpetrators. Qui tam is short for a Latin phrase, "qui tam pro domino rege quam pro siepse". The phrase translates to "as much as for the king as for himself". The phrase refers to filing a lawsuit on behalf of the government to recover any defrauded damages.

Filing a qui tam lawsuit is only one way of reporting insurance fraud. A whistleblower can also report an insurance fraud directly to the agency being defrauded. Defrauding Medicare or Medicaid, for example, should be reported to either of those agencies. Whistleblowers can also contact their state insurance departments and ask to speak to the fraud prevention bureau. 

Famous Qui Tam Cases Involving Insurance Fraud

James F. Alderson filed a qui tam lawsuit against Columbia/HCA Healthcare Corporation for allegedly defrauding both Medicare and Medicaid. Alderson alleged that hospitals run by the company throughout the United States routinely filed false claims and padded their reports in order to increase their reimbursements. A separate qui tam lawsuit was later filed in Florida by John Schilling about the same situation. In 1998, four mid-level executives were indicted with criminal charges as a result of the evidence provided to the Justice Department by Schilling. The company ended up paying $1.7 billion in damages for the fraud.