Danny Patrick Keating Jr., a New Orleans personal injury attorney, was indicted on 5 November 2020. He pleaded guilty on 17 June 2021. He had paid Damian Labeaud for 31 crashes Labeaud staged with commercial trucks, and represented 77 plaintiffs in them. On 15 October 2026 he was sentenced to 32 months and $657,405.34 in restitution (US Attorney, Eastern District of Louisiana).
What is insurance fraud, and when does it become a crime?
Insurance fraud is fraud committed while insurance is bought, used, sold or underwritten. The NAIC, the US state insurance regulators' association, defines it on a page last updated 23 June 2026: "Insurance fraud occurs when an insurance company, agent, adjuster or consumer commits a deliberate deception to obtain an illegitimate gain."
It becomes a crime when intent and an act come together. California's regulator calls it a "specific" intent crime. "Actual monetary loss is not necessary," it adds (California Department of Insurance).
The Coalition Against Insurance Fraud says it steals "at least $308.6B every year from American consumers" and gives no study year. UK insurers detected over 98,400 fraudulent general insurance claims worth £1.16 billion in 2024 (ABI, 17 November 2025).
What is the difference between hard and soft insurance fraud?
Hard fraud "occurs when a policyholder deliberately destroys property with the intent of collecting on the insurance policy" (NAIC). Soft fraud is more common. It means exaggerating a legitimate claim or lying on an application for a lower premium, and NAIC says it is often considered "a crime of opportunity".
Fronting is soft fraud. A younger driver goes on the policy as a named driver while really being the main one, which cuts the premium. The claim can be refused, the policy canceled and the driver prosecuted (ABI).
How does an insurance fraud scheme work, from staged crash to settlement?
One crash in the Keating probe, on 6 June 2017, shows each stage of a staged crash scheme (US Attorney, Eastern District of Louisiana, 23 January 2023).
Table 1. The 6 June 2017 staged crash, stage by stage (facts from the US Attorney; the last column is the author's reading).
| Stage | What the ring did | What the insurer sees | Who can stop it |
|---|---|---|---|
| 1. Recruit | Four people drove from Houma to meet Labeaud and let him drive the owner's car | Nothing | No one yet |
| 2. Stage | Labeaud drove into a commercial truck run by an Arkansas trucking company, then put the owner behind the wheel | A police report saying the truck hit the owner's car | Officers at the scene |
| 3. Witness | Labeaud came back and told police he had seen the crash and the truck driver was at fault | An independent witness statement | The claims handler, by checking who the witness is |
| 4. Lawyer | Labeaud set up a meeting with Keating, who filed two lawsuits; three of the four gave false depositions | Injury claims in court | Defense counsel, by joining claims on the same people |
| 5. Settle | After a year, three of the four settled | $7,500 each | The insurer, by referring the file to investigators |
Each file is small. Labeaud charged attorneys $1,000 per passenger for a crash with a tractor trailer and $500 per passenger for other crashes (US Attorney, 17 June 2021); the settlements in Table 1 came to $22,500. Picture an illustrative ring: six crashes, three passengers each, $9,000 a claim. That is 18 claims and $162,000, and no file big enough to stand out.
Ufuk Gürdaş, who reviewed this entry, says: "In the New Orleans case one recruiter supplied 31 staged crashes and 77 plaintiffs to one attorney; read one file at a time, that is 31 separate accidents, and only joining claims on the shared lawyer, recruiter and passengers shows it is one scheme."
Common types of insurance fraud: which schemes hit insurers, and which hit buyers?
Table 2. Eight common types of insurance fraud at a glance (the Control column is the author's reading).
| Type | How it works | Hard or soft | Who loses | Control |
|---|---|---|---|---|
| Staged motor crash (crash for cash) | Staged, induced or ghost accidents (ABI) | Hard | Insurer; an innocent driver's no claims bonus | Join claims on shared people |
| Exaggerated claim | A claim pushed beyond its true value (ABI) | Soft | Insurer, then premium payers | Loss adjuster review |
| Deliberate property loss | Property, such as a home, destroyed on purpose to collect (NAIC) | Hard | Insurer | Cause investigation |
| Application fraud and fronting | Facts hidden or misstated when cover starts (ABI) | Soft | Insurer | Data checks at quote |
| Ghost broking | Fake or invalid policies sold cheaply, often on social media (FCA) | Neither: fraud against buyers | The buyer, left uninsured | FCA Firm Checker |
| Premium diversion and fake insurers | An agent keeps the premiums, or a bogus company sells policies it will not pay (NAIC) | Neither: fraud against buyers | Policyholder | License check with the state |
| Life | Lies on the application (NAIC); viatical settlement fraud (FBI) | Soft, for application lies | Insurer | Application and claim checks |
| Health billing | A provider bills a health plan falsely; NAIC ranks Medicare and health insurance among the most common by frequency and cost | Provider fraud | Health insurer, Medicare | Provider billing review |
Motor scams were 53 percent of the fraudulent claims UK insurers detected in 2024, 51,700 worth £576 million (ABI). Exaggerated loss stayed the most common type, at £466 million. An estimated 684,800 fraudulent applications were also prevented.
Who commits insurance fraud?
In 2012 the FBI named three groups: dishonest policyholders, insiders such as agents, brokers and company executives, and "loosely organized networks of crooked medical professionals and attorneys" (FBI, 31 January 2012).
Among agents and brokers, NAIC says, premium diversion is the most common scheme: the producer keeps the premiums instead of sending them to the insurer. Insiders who steal from their own insurer commit employee fraud.
Which warning signs help insurers identify insurance fraud?
In a Kantar survey for the FCA (1,000 UK drivers aged 17 to 25, 24 April to 1 May 2026), 49 percent had bought insurance through social media or messaging apps. Ghost brokers "pose as legitimate insurance sellers but offer cheap rates", the FCA says, and a driver caught with fake cover can face penalties of up to £300 and a seized car (FCA).
Fraudsters leave indicators in three places:
- Seller. Not on the FCA Firm Checker, messaging apps only, paid by bank transfer, crypto or cash (FCA), or 15 to 20 percent below comparable cover (NAIC).
- Claim. A calm driver with insurance details written down, injuries at odds with the impact (ABI), a stranger recommending a lawyer (FBI).
- Application. A named driver who is really the main driver (ABI).
How do insurers detect insurance fraud?
NAIC describes insurers moving from business rules and red flags to predictive modeling, link analysis and AI. A model scores each claim. Link analysis joins claims that share people, phones or vehicles, and a person still decides which file goes to investigators. In 43 states and DC, insurers must report suspected fraud (CAIF, March 2020).
What penalties does insurance fraud carry in the US and UK?
Table 3. Insurance fraud penalties by jurisdiction (maximums as each section prints them).
| Jurisdiction | Law | Conduct it reaches | Penalty or remedy |
|---|---|---|---|
| US, federal | 18 U.S.C. 1033 | People in the business of insurance whose activities affect interstate commerce: knowingly false statements, made with intent to deceive, in reports to insurance regulators; willfully embezzled premiums or funds | A fine or up to 10 years, or both; up to 15 if it jeopardized the insurer and was a significant cause of its conservation, rehabilitation or liquidation; up to 1 year if $5,000 or less was embezzled |
| US, federal | 18 U.S.C. 1341, mail fraud | Schemes that use the mail, such as Keating's mailed settlement demands | A fine or up to 20 years, or both; up to $1,000,000 or 30 years, or both, if it affects a financial institution or a declared disaster benefit |
| US, federal | 18 U.S.C. 371, conspiracy | Two or more people conspiring to commit a federal offense, plus an act toward it; Keating's count | A fine or up to 5 years, or both |
| US, California | Penal Code sections 548 to 550 (s550) and the Insurance Fraud Prevention Act (CDI) | Specific intent fraud; act and intent together | A felony for the false claims of s550(a)(1) to (5), staged crashes included: 2, 3 or 5 years and a fine of up to $50,000 or double the fraud, whichever is greater (s550(c)(1)); no loss needed, and cases can go federal, usually as mail fraud or racketeering (CDI) |
| England, Wales, Northern Ireland | Fraud Act 2006, s2 | False representation, such as a padded claim | Up to 10 years or a fine, or both, on indictment (s1(3)(b)) |
| Scotland | Common law fraud (Scottish Government) | Fraud Act sections 1 to 9 do not extend there (s15(2)) | Not stated here |
| United Kingdom | Insurance Act 2015, s12, civil | A fraudulent claim by the insured | Insurer "not liable to pay the claim", may recover sums paid and, by notice, treat the contract as ended from the fraud and keep the premiums; whole UK (s23) |
In the US insurance fraud is mainly a state crime, a crime in 48 states. Federal law reaches it through the Violent Crime Control and Law Enforcement Act of 1994 when interstate commerce is affected (NAIC). Fighting fraud is a purpose of insurance regulation, "an important aspect of state insurance regulation" (NAIC); 42 states and DC run fraud bureaus. A UK insurer can refuse a fraudulent claim whether or not anyone is prosecuted.
How is insurance fraud different from healthcare fraud and benefit fraud?
Insurance fraud deceives an insurer. In ghost broking and premium diversion the person deceived is the buyer of cover. Healthcare fraud is the provider side: a provider billing a health insurer or Medicare falsely. Benefit fraud cheats the state, not an insurer.
How does insurance fraud connect to money laundering?
FinCEN's AML rules for insurers cover policies that hold value: permanent life and annuities, group contracts excluded, and other cash value or investment products (31 CFR 1025.100). Insurers report suspicious transactions of at least $5,000, alone or added up (31 CFR 1025.320).
Screen policyholders and beneficiaries against OFAC sanctions lists, with EDD where the risk is higher. The whitepaper on AML in the insurance industry sets out the program; how fraud and money laundering differ separates the two offenses.
What can policyholders and insurers do to prevent insurance fraud?
For buyers and insurers:
- Stop. Call. Confirm. Ask the state insurance department whether the company may sell there (NAIC); in the UK, look the seller up on the FCA Firm Checker.
- Report it through NAIC's Online Fraud Reporting System, which routes it to the right state department. In the UK, tell the police and the Insurance Fraud Bureau Cheatline (0800 422 0421) about a crash for cash (ABI); money lost to a fake policy goes to Report Fraud (in Scotland, via 101), then the FCA.
- Join claims on shared passengers, witnesses and lawyers before paying, and screen brokers and repair shops as you screen customers.
At complead, formerly Sanction Scanner, a customer gets one risk score. Onboarding, screening, monitoring, fraud and investigation share one engine, and fraud and AML are assessed on one customer record.
AML and fraud controls for insurers put the policyholder, payer and beneficiary in one file, and a held payout is recorded with a documented reason and an owner.
Keating was sentenced almost six years after his indictment, in a probe that has charged 63 people. Of the 31 crashes he paid for, 17 ended in settlements.
Related terms
- Healthcare fraud. Providers billing health insurers or public health programs falsely.
- Benefit fraud. Claiming a state benefit you are not entitled to.
- Employee fraud. An insider defrauding the business that pays them.
