Tips for Detecting and Protecting Yourself Against Insurance Scams

Disclaimer: The examples provided in this article are hypothetical and are intended for illustrative purposes only. All scenarios, characters, and dollar amounts are fictitious and do not represent any actual individuals, events, or insurance claims. Readers should consult with a licensed insurance professional for advice specific to their situation. 

Imagine getting a call from someone claiming to be an insurance agent offering auto coverage at half the price you currently pay. The deal sounds great, so you pay the premium and receive what looks like a legitimate insurance ID card. Months later, you get into an accident and try to file a claim, only to discover the policy never existed. The "agent" is gone, along with your money, and you have no coverage. 

Insurance scams can affect anyone and knowing how to spot them can save you from financial loss and stress. 

Understanding Insurance Scams 

According to the Coalition Against Insurance Fraud, insurance fraud costs U.S. consumers approximately $308.6 billion annually [1]. Unfortunately, this affects all of us, as these losses get passed on to consumers in the form of higher premiums. 

Insurance fraud can take many forms. Sometimes dishonest or fake individuals and companies commit fraud against consumers. Other times, individuals may commit fraud against insurance companies by filing false claims or knowingly providing incorrect information on applications [2]. 

This article focuses specifically on scams that target consumers. These are situations where dishonest individuals or organizations try to take advantage of people looking to purchase or maintain insurance coverage. While fraud committed against insurance companies is a separate topic, our goal here is to help you recognize and avoid becoming a victim of scams designed to steal your money and leave you without proper coverage. 

Common Types of Insurance Scams 

Premium Diversion and Fake Agents 

One of the most common types of insurance fraud involves dishonest and unlicensed individuals who pose as legitimate agents and sell fake insurance policies that provide no real coverage or motor vehicle insurance ID cards that are not backed by actual policies. These scammers often disappear once they collect payment, leaving victims without protection. 

How to Protect Yourself: Verify agent and company licensing before purchasing any insurance policy. Confirm that both the company and agent are properly licensed to sell insurance in Hawai'i. You can check licensing information through the Hawai'i Department of Commerce and Consumer Affairs Insurance Division or the National Association of Insurance Commissioners (NAIC) online tool [3]. 

Ghost Brokers 

Ghost brokers sell fake or canceled insurance policies to unsuspecting consumers. These policies may look legitimate on paper, but they provide no actual coverage. Victims often discover the fraud only when they try to file a claim and learn their policy does not exist [1]. 

How to Protect Yourself: Take your time when purchasing insurance. Compare quotes from multiple sources to ensure you are getting fair pricing. Review policy documents carefully and ask questions about anything you do not understand. Make sure you understand what coverage you are purchasing, including deductibles, policy limits, and exclusions. 

Be wary of deals that seem too good to be true. If premiums are significantly lower than what other companies offer for similar coverage, this may indicate a scam. 

After-Disaster Contractor Scams 

Hawai'i faces unique risks from natural disasters like earthquakes, hurricanes, and floods. Following these events, dishonest contractors may approach homeowners and offer to handle insurance claims on their behalf. These scammers collect payment for repairs that insurance does not cover or perform substandard work. Some may even file false claims without the homeowner's knowledge. 

Imagine this scenario: after a hurricane causes significant damage to homes across O'ahu, the Wong family discovers roof issues that cause water damage inside their home. Within days of the storm, a contractor knocks on their door offering to help. He says he's working in the neighborhood, can start immediately, and will handle everything including filing the insurance claim on their behalf. 

The contractor seems knowledgeable and provides references from other homeowners on their street. He asks the Wong family to sign a "contractor agreement" and requests a 50% deposit of $8,000 to purchase materials. He also asks them to sign blank insurance claim forms so he can "expedite the process" with their insurance company. 

The contractor does minimal work over the next week, then stops showing up. When the Wongs contact their insurance company to check on the claim, they learn that the contractor filed for damages totaling $25,000, far more than the actual damage. The claim includes repairs that were never discussed and services that were never performed. Worse, the shoddy work the contractor did perform has actually created new problems with water intrusion. 

The Wongs are now stuck with incomplete repairs, potential insurance fraud charges, and they've lost their $8,000 deposit. The contractor has disappeared and isn't responding to phone calls. 

How to Protect Yourself: Natural disasters can create opportunities for scammers. After a hurricane, flood, or other disaster, be especially careful about who you allow to inspect your property or file claims on your behalf. 

Verify contractor licenses through the State of Hawai'i lookup tool before hiring anyone for repairs. Do not allow unsolicited contractors to file insurance claims for you. Get multiple estimates for repair work and compare them carefully. 

Report damage to your insurance agent rather than relying on third parties to handle the process. If you cannot reach your agent, report your damage directly to your insurance company. 

Stay Vigilant: Warning Signs of Insurance Scams 

Being able to recognize warning signs can help you avoid becoming a victim of insurance fraud. The NAIC encourages consumers to watch for these red flags [2]: 

• High-pressure sales tactics urging you to buy immediately or risk losing a special price. 

• Prices significantly lower than competitors, 15% to 20% or more below market rates for similar coverage. 

• Requests for large upfront payments, especially for more than half the total premium. 

• No written policy received within a reasonable time after payment. 

• Difficulty contacting the agent or company by phone or email. 

• Unlicensed or unverifiable agents who cannot provide proper credentials. 

The NAIC  developed the "Stop. Call. Confirm." campaign to help consumers avoid fraud. Before signing any paperwork or making a payment, stop and verify that the company and agent are legitimate by contacting the Hawaii Insurance Division [2]. 

Insurance fraud hurts everyone in our community by driving up costs and undermining trust in the insurance system. While these scams exist, most insurance professionals in Hawaii are honest and committed to serving their customers well. This underscores the importance of doing thorough research before drawing conclusions. 

If you encounter suspicious activity or believe you may have been a victim of insurance fraud, contact the appropriate authorities. The State of Hawai'i Department of Commerce and Consumer Affairs, Insurance Division is a good place to start.

Being vigilant and informed is your best defense against insurance scams. 

Sources 

1. Coalition Against Insurance Fraud. (2022). “The Impact of Insurance Fraud on the U.S. Economy.” Accessed January 20, 2026. https://insurancefraud.org/fraud-stats/ 

2. National Association of Insurance Commissioners. “Insurance Fraud.” Accessed January 20, 2026. https://content.naic.org/insurance-topics/insurance-fraud 

3. State of Hawaii Department of Commerce and Consumer Affairs. Insurance Division. Accessed January 20, 2026. https://cca.hawaii.gov/ins/