Insurance fraud and criminal activity in the insurance industry cost consumers big time. In fact, $300 out of every $1,000 paid in insurance premiums goes to criminals. The actual cost to the industry? Estimates range from $80 to $300 BILLION every year and it is rising.

The question is: How long will consumers keep paying higher premiums to cover insurance fraud? It seems to me that no industry can expect to sustain itself when almost one-third of its sales go to pay costs (like fraud) with NO real benefit. So, will insurance fraud lead to a shut down of entire product lines, including ones you sell everyday? Why not? Just like out of whack claims (expenses) led to the virtual elimination of coverage for mold, asbestos, flood, earthquake, etc., crazy fraud expenses could do the same.

What can we (agents) do to mitigate the fraud problem? While industry experts, like Barry Zalma, believe insurance fraud will never be stopped, fraud mitigation is, to some extent, now in the hands of insurance agents and insurance companies to report. ‘Just let the legal system handle it,’ you say. Not so easy these days. In his monthly Zalma Insurance Fraud Letter (free to agents), Barry says that insurance fraud is the “orphan child” of the criminal justice system because most police, federal investigators, prosecutors and even state insurance fraud divisions will do nothing until a fraud case is presented to them, in detail, by an insurer.

So it’s up to you. What can you do? First, recognize that insurance fraud exists, in your own backyard, at many different levels:

  • Diversion of premiums by agents
  • Fee churning
  • False or exaggerated claims by policyholders
  • Misclassification of damage
  • Claims by out of area residents
  • Bid-rigging by contractors
  • Charity fraud scams
  • Arson
  • Hired killers to collect life insurance
  • Medicare and Medi-Cal treatment scams

Learn to recognize the warning sign with real world examples from Barry’s monthly fraud letter at, then REPORT IT. Doing so could be important to your future paychecks.