Every year, insurance fraud costs Australians significantly, impacting everyone from individual policyholders to large insurance companies. Far from being a victimless crime, insurance fraud is a form of theft involving deception for financial gain. It results in higher premiums for honest customers and creates a climate of suspicion that can make a legitimate claim harder to process. It is estimated that insurance fraud costs up to $2.2 billion annually, directly affecting premiums for honest policyholders. Insurers may have to pay out on fraudulent claims, which increases costs for everyone. As a result, honest policyholders end up paying higher premiums due to insurance fraud.
According to the ACCC’s Targeting Scams Report, Australians reported $2.03 billion in combined losses to scams in 2024, representing a 25.9% decrease from 2023. However, more recent data indicates Australians lost 28% more money to online scams in the first four months of 2025. Insurance fraud poses a significant problem, prompting governments and organisations to deter such activity.
What Is Insurance Fraud?
Insurance fraud involves intentionally misleading or fabricating information to gain an unfair financial benefit from an insurance claim or policy. It involves deliberately deceiving an insurer to gain financial advantage, whether through misrepresenting facts, submitting false documentation, or making claims for losses that never occurred. The chief motive in all insurance crimes is financial profit. Some fraudulent claims do not result in any actual loss to the insurer, highlighting the deceptive nature of such activities that mimic legitimate claims.
Types of Insurance Fraud
Hard fraud occurs when someone deliberately plans or invents a loss to claim payment for damages.
Insurance fraud generally falls into two main categories:
- Opportunistic fraud typically involves exaggerated claims on otherwise legitimate claims. For example, a policyholder might claim for more damage than actually occurred or include pre-existing damage in a new claim. Opportunistic fraud is sometimes referred to as ‘soft fraud.’
- Premeditated fraud is planned and calculated with the specific intent to defraud an insurance company. These schemes are often more complex and may involve organised criminal groups who systematically target insurers.
Insurance fraud is not a victimless crime. While it might seem that only large, profitable insurance companies suffer, the reality is that the costs are passed on to all policyholders through higher premiums. Additionally, fraudulent claims divert resources away from legitimate claimants and can create a more suspicious and lengthy claims process for everyone. Undetected insurance fraud is often treated as a legitimate claim and can be paid out by insurers, impacting honest policyholders.
Common Types of Insurance Fraud in Australia
Insurance fraud takes many forms across different insurance products. Here’s a breakdown of the most common types:
| Type | Description | Example | Who Commits It |
| Opportunistic Fraud | Exaggerating legitimate claims | Inflating repair costs after an accident | Policyholders |
| Premeditated Fraud | Planned, deliberate acts | Staging car accidents | Individuals, groups |
| Non-Disclosure | Withholding or misrepresenting facts | Hiding pre-existing damage | Policyholders |
| Healthcare Fraud | Billing for unnecessary procedures | Overcharging for medical services | Healthcare providers |
| Fake Deaths | Faking a death to claim life insurance | Disappearing after policy payout | Policyholders, beneficiaries |
| Property Fraud | Faking or staging incidents | Arson, staged burglaries | Policyholders, accomplices |
Real-World Examples
- Car Insurance Fraud: A person deliberately damages their own vehicle and claims it was vandalised.
- Home Insurance Fraud: Someone reports items stolen that they never owned or hides valuables and then claims they were stolen.
- Health Insurance Fraud: A provider bills for services never rendered or unnecessarily extends treatment to maximise insurance payments. Studies suggest that the greatest total dollar amount of fraud is committed by health insurance companies.
- Workers’ Compensation Fraud: An employee exaggerates an injury to receive benefits while secretly working another job.
Each of these examples represents a criminal offense that can lead to serious legal consequences.
Recognising the Warning Signs
Being able to identify potential insurance fraud helps protect both the industry and honest policyholders. Here are key warning signs to watch for:
- Claims filed shortly after policy inception or just before policy expiration
- Inconsistent or changing accounts of how damage or injury occurred
- Reluctance to provide documentation or excessive documentation that appears fabricated
- A claimant who seems unusually familiar with insurance terminology and processes
- Multiple claims with similar patterns or circumstances
- Addresses or contact details that don’t check out or frequently change
Fraudulent claims are identified through investigative processes that analyse claim details and look for inconsistencies or red flags.
For Consumers:
If you notice these signs when dealing with service providers or other parties involved in your claim, be cautious and consider reporting your concerns to your insurer.
For Professionals:
Insurance adjusters and claims handlers should be particularly alert to these red flags and follow established protocols for investigating suspicious claims. Reviewing claims for signs of fraud before approval is essential to prevent losses.
The consequences of insurance fraud extend far beyond the immediate financial loss to insurers. The Insurance Fraud Bureau of Australia (IFBA) was established to coordinate an industry response to combat insurance fraud.
The consequences of insurance fraud extend far beyond the immediate financial loss to insurers.
Financial Impact on Consumers
Insurance fraud can contribute to increased costs for insurers, which may be reflected in premium calculations for policyholders. Insurers may have to pay fraudulent claims, and as a result, honest policyholders end up paying higher premiums.
Industry and Economic Costs
The insurance industry must invest in fraud detection and prevention measures, which adds to operational costs. These resources could otherwise be used to improve services or potentially reduce premiums for customers.
Social Consequences
Insurance fraud creates an atmosphere of distrust. Legitimate claimants may face more scrutiny and delays in processing their claims as insurers implement stricter verification processes to combat fraud. Verifying the validity of a claim is crucial to distinguish a legitimate claim from a fraudulent one and protect honest policyholders.
Legal Consequences and Penalties in Australia
Insurance fraud is treated as a serious offense in Australia, with penalties that vary by jurisdiction and the nature of the offense. False or misleading statements related to insurance claims can result in fines or imprisonment under the law. Submitting false information can lead to penalties, claim denial, or even criminal prosecution.
| Offence Type | Potential Consequences |
| Minor Fraud | Denied claims, policy cancellation, financial penalties |
| Serious Fraud | Criminal charges, potential imprisonment, fines, restitution requirements |
Insurance fraud is prosecuted under various state, territory and Commonwealth laws, depending on the nature and extent of the fraudulent activity.
If found guilty of insurance fraud, possible consequences may include:
- Criminal penalties including potential imprisonment
- Financial penalties
- Requirement to repay fraudulently obtained benefits
- Difficulty obtaining insurance in the future
- Damage to reputation and employment prospects
How to Report Insurance Fraud
If you suspect insurance fraud, there are several channels through which you can report it:
Step-by-Step Reporting Guide:
- Document everything: Collect as much information as possible, including dates, names, and specific details of the suspicious activity.
- Contact the insurer directly: Most insurance companies have dedicated fraud reporting channels.
- Report to industry bodies: The Insurance Council of Australia provides resources for reporting suspected insurance fraud.
- Contact law enforcement: For serious cases, especially those involving organised crime, contact your local police.
Individuals can report suspected insurance fraud confidentially to the Insurance Commission. Please refer to the Insurance Council of Australia’s guidance note or your insurer’s website for more information on how to report insurance fraud.
When reporting, provide specific details rather than general suspicions. Your identity can usually be kept confidential during the investigation process. If you suspect fraudulent activity, do not hesitate to report fraud using the available channels.
Step-by-Step Reporting Guide:
- Document everything: Collect as much information as possible, including dates, names, and specific details of the suspicious activity.
- Contact the insurer directly: Most insurance companies have dedicated fraud reporting channels.
- Report to industry bodies: The Insurance Council of Australia provides resources for reporting suspected insurance fraud.
- Contact law enforcement: For serious cases, especially those involving organised crime, contact your local police.
When reporting, provide specific details rather than general suspicions. Your identity can usually be kept confidential during the investigation process.
What to Do If You’re a Victim
If you believe you’ve been a victim of insurance fraud:
- Contact your insurer immediately: Explain the situation and provide all relevant documentation.
- File a police report: This creates an official record of the incident.
- Contact financial institutions: If bank accounts or credit cards are involved, notify your bank immediately.
- Seek legal advice: Consider consulting with legal professionals who specialise in financial matters.
- Document everything: Keep copies of all communications, including dates and names of people you speak with.
Remember that victims of fraud have rights, including the right to fair treatment during investigations and access to support services.
Insurance Fraud Prevention Tips
For Consumers:
- Be wary of anyone who approaches you with schemes to make money from insurance claims
- Check that your insurance broker or agent is properly licensed
For Professionals:
- Implement thorough verification procedures for claims
- Train staff to recognise warning signs of fraudulent activity
- Maintain detailed documentation of all client interactions
- Establish clear protocols for reporting suspicious claims
- Stay updated on new fraud schemes and prevention techniques
For Researchers/Students:
- Study industry reports on fraud trends and prevention strategies
- Analyse case studies of significant fraud investigations
- Explore the intersection of technology and fraud detection
- Consider the ethical implications of fraud prevention measures
Key Takeaways:
- Insurance fraud affects the broader community through its impact on the insurance system
- Insurance fraud ranges from opportunistic exaggeration to complex criminal schemes
- Legal consequences can be serious, including potential criminal penalties
- Reporting suspected fraud helps protect the community
- If you’re a victim of fraud, act quickly and seek professional support
- Prevention is the best approach – understand your policy and maintain accurate records