Here are the types of fraud that experts name as the most prevalent:

The old reliables

Claims padding—“Lost wedding rings, inflated home entertainment systems after burglaries or house fires—these kinds of claims are a perennial drain on insurers,” Quiggle said.

Staged auto crashes—A long-standing, well established and sophisticated crime niche, dominated by ethnic groups (Russians, Armenians, Estonians), especially in heavily populated urban areas in states with mandatory personal injury protection insurance like Florida, Massachusetts, New York and New Jersey. Crooks take out policies on people who then stage accidents to collect medical benefits under the state's no-fault provisions, said Tom Welsh, vice president for training at NICB. A largely Russian-run ring in New York made at least $400 million in bogus injury claims, Quiggle said.

Contractor fraud—Whenever natural disasters strike, contractor scams are close behind; and events such as Superstorm Sandy are like ringing the dinner bell for crooks. The problem has grown so acute that more states are passing laws cracking down on dishonest contractors.

Workers' comp fraud—Strapped business owners reluctant to part with cash for workers' comp premium are hiding workers in shell companies or labeling them independent contractors, especially in the construction industry, Quiggle said. Networks of check-cashing firms help launder the money.

Arson—Economic hard times always make auto, home or business arson more popular. Nearly two-thirds of state fraud bureaus reported increased home arson cases in 2010.

Some new wrinkles

Healthcare reform scams—The large market of uninsured Americans are ripe for the pickings here, as bogus healthcare plans grow. Most state fraud bureaus have reported a spike in fake health plans, with nearly 40 percent saying their caseloads were much higher, CAIF reported.

Ghost brokering—The growth in online and direct insurance has created a lucrative market for an emerging trend known as “ghost brokering,” said James Ruotolo, principal at SAS, a business analytics software firm. Ghost brokers offer significantly cheaper insurance rates than legitimate insurance agents by falsifying key details in the application to ensure that the insured pays lower premiums. Ghost brokers are often unlicensed and the policies they obtain for their customers/victims may be invalidated because of the fraudulent way in which they were obtained. Although the practice is prevalent in the United Kingdom, more cases are emerging in the U.S., Quiggle said.

The role of technology

Most types of insurance fraud are as old as insurance itself, but technology changes the way insurance fraud is committed. Cyber fraud is in a field by itself and many scammers use bogus websites to lure people into buying fake health, auto or other coverages.

Healthcare, and healthcare reform in particular, is a big growth area for fraud. “Health insurance dwarfs all forms of coverage,” Quiggle said. “The money can be so easy to steal that drug dealers are getting into insurance fraud because they perceive the risk of getting caught is lower and income potential is much higher.”

Thieves looking to cash in on confusion over PPACA set up websites that create the appearance of an exchange website or affiliation with health reform. And although many appear to be deceptive but relatively benign attempts to market legitimate insurance products, some are malicious attempts to capture buyers' personal ­identification ­information for identity theft, Quiggle said.

Other “copycat” websites made to look like legitimate insurers entice consumers into buying worthless coverage. “Warm and inviting websites purporting to sell health insurance actually peddle bogus coverage, leaving consumers dangerously uncovered,” Quiggle said.

Scammers also use phishing to create emails claiming to be from insurers. Unwitting consumers who open the messages can fall victim to requests for sensitive personal information or spread malware into their computers. Many emails are disguised as being from official sources such as the federal government, claiming recipients are required to register for an “official Obamacare health card” and netting personal identifying information.

Outside of healthcare reform scams, personal information in general is more at risk because most legitimate insurance transactions are conducted at least partially online, Welsh said. “With Internet access, the entire lifecycle of a claim can be online, starting with the application, through submission of the claim and supporting documentation, to interaction with the insurer to electronic payment of the claim,” making it easy for hackers to access and manipulate data, he said.

And although insurers use multiple safeguards and crosschecking techniques to stem fraud, “because of the ease and use and lack of face-to-face interaction with the insurance company, technology does make it easier and more tempting to commit fraud,” he said.

Many insurers also offer their agents anti-fraud training, and are harnessing the power of advanced analytics to catch fraud in closer to real time, Quiggle said. For more information, read “4 Fighting-Fraud Checklists for Agents” on propertycasualty360.com.

How an Agent can Spot Insurance Fraud

Agents are in a unique position to spot insurance fraud before it happens because they are sometimes dealing face-to-face with the would-be perpetrators. Fraud experts—and insurance agents who have personally faced down fraud—provided this checklist for agents to use in preventing the most prevalent forms of insurance fraud:

Auto fraud:

• No record of prior coverage

• Vehicle garage address does not match mailing address or driver's license address

• The policy took effect just before the loss

• The policy expires soon

• Policyholder frequently wants to add or remove vehicles and/or drivers from their policy

• Policyholder asks you to back-date coverage such as towing or rental

• More vehicles than drivers listed on the policy

• The client sharply increased the policy before the loss

• The client has personal or financial problems

• The crash happened shortly after the policy was taken out or the vehicle was registered.

Commercial fraud:

• Claimant is ill or nearing retirement age

• Finances are in arrears, such as taxes, payroll and loans

• Inventory is obsolete or overstated

• Claimant sharply increased policy just before loss

• Policy seems to overvalue property

• Claimed loss is not directly related to business.

Personal property loss (home arson, stolen possessions):

• Claimant sharply increased policy before loss

• Client has significant debt or faces foreclosure

• Insured property, such as jewelry or home music system, seems far more expensive than client's income

• Policyholder asks you to backdate coverage such as water coverage endorsement

• Building or contents were for sale at the time of loss

• Property is in disrepair, condemned or to be demolished

• Several items were recently added to the policy just before the loss.

General red flags:

• Applicant is unsolicited, walk-in business not referred by an existing policyholder

• Applicant states he or she will soon be moving to insuring state and wants to establish coverage before moving there

• The applicant needs insurance immediately, and “doesn't have time” to provide detailed answers to standard questions

• Applicant neither works nor resides near the agency

• Applicant wants to or already has paid premium in cash or by another non-traceable method (cashier's check, money order)

• Applicant's address is in a high-rise apartment complex, but no apartment number is listed

• Applicant initially quotes a commercial policy, then later buys a personal lines policy for the same vehicle

• Personal lines policy paid for with routing number/account number of a corporate bank account (and vice versa)

• Applicant requests all correspondence to be sent to an out-of-state address

• Applicant cannot produce current identification and/or driver's license, or has a temporary, recently issued, or out-of-state driver's license/state identification card

• Applicant is unusually familiar with insurance terms or procedures, such as medical terminology, workers' compensation claims ­handling procedures and laws, and vehicle repair terminology, coverage and special limits

• If you suspect someone is gaming the system or intentionally trying to obtain benefits to which they are not entitled, contact the ­insurance companies' special investigation unit or the National Insurance Crime Bureau hotline at 1-800-TEL-NICB.

Fraud at Work: A True-Life Experience

Charles Raymond, AAI, of Sitzmann Morris & Lavis Insurance Agency in Oakland, Calif., relates the following story:

I was contacted out of the blue by a prospect who lived in the area looking for renters, auto and umbrella coverage. (Clue 1: He alleged he found me via one of my carriers' websites. In my particular business, that's highly unusual.)

As I was going through my typical questions, I got to the claims history and current carrier information and he tells me he is being non-renewed by a very well-known mutual company because of a total loss due to a fire. In fact, he had multiple products with this mutual and he was basically being “kicked out.” I figured I could get by based on the claims information and how the fire started.

As the questioning continued, he wanted to know if a particular high-end insurer would take him because he heard that it paid claims. (Clue 2: Clients usually don't ask about specific carriers if they're being non-renewed, and especially on claims paying.)

Next, he offered to send the fire marshal report, though the insurer would not release its report on the nature of the loss. While the fire marshal report didn't specify the exact reason for the fire, it did imply unusual circumstances behind it but didn't come right out and state it was arson.

It was only after we were nearly finished with our phone interview that he revealed that in addition to the most recent fire, he had two more fires in his history—one with the same mutual a few years earlier that was also a total loss, and one back in the 1990s, also a substantial loss. (Clue 3: Having a single fire loss is in the single percentage points when it comes to overall property losses in an insured's lifetime, but having three fire losses in the span of 15 or so years is way over the top from an actuarial point of view.)

At this point, I figured no one would take him but I attempted to get terms for the client anyway. None of my high-net-worth carriers would take him, but I did get a reputable Main Street carrier to offer terms and sent them to him. I explained that his application was denied for the claims history and he wasn't happy. He never responded.

The prospect was hitting the classic red flags:

• Calling out of the blue with no referral from someone I know

• Asking about a specific carrier because of its claims-paying ability

• Multiple fire losses that defy the odds when it comes to actuarial data

• Adverse reaction when presented with terms from a carrier he didn't want and then never responding to follow ups.