Staying alert for red flags and contacting law enforcement when insurance fraud is suspected are keys to addressing a high-cost problem affecting the insurance industry.
On the surface, the elderly native of China appeared to be an acceptable life insurance risk.
A 76-year-old Florida resident, he was said to be in good health, had never used any form of nicotine, and did not drink alcohol. Medical records indicated no abnormalities during checkups with his primary care physician in 2018, 2020, and 2023. Moreover, he would be more than able to pay the premiums on the $1 million policy he was seeking. Financial statements revealed a net worth of $3.68 million and an annual income of $225,000 as a business partner at a Chinese restaurant.1
A life insurance company with more than 100 years of experience writing policies approved the man for coverage in July 2023.2
There was just one problem: Little about the man was as it seemed. Rather than a millionaire restaurateur in picture-perfect health living in Florida, he was, in fact, a small player in an allegedly large insurance fraud ruse that led to a July 2025 indictment filed in federal court.
A few months after obtaining the policy, the man died in what turned out to be his primary residence in China, the indictment states. His policy was just one in a gambit that ran for nearly a decade.
This is one of several recent cases that provide an example for insurers on the need to remain vigilant for red flags and to involve law enforcement to send a strong public message about fraud.
The life insurance industry loses an estimated $74.7 billion to fraud each year.3 That makes up the largest single piece of the insurance-fraud pie, which totals $328 billion annually.4 (See Figure 1)
An unknown portion of that nearly $75 billion total comes from applicants, current customers, and brokers who failed in their first attempt at insurance fraud (and sometimes second and third) but whose crimes went unreported to authorities. According to ֲ’s Global Claims Fraud Survey, fewer than 2% of identified fraud cases result in prosecution.5
The National Insurance Crime Bureau (NICB) has emphasized the importance of collaboration between insurers and law enforcement. In 2023, NICB was granted access to the FBI’s National Data Exchange (N-DEx), allowing them to receive alerts on subjects of interest across jurisdictions.6 This cross-agency intelligence sharing is possible only when fraud is reported.
The true victims when insurers fail to report fraud are honest, ethical policy seekers forced to compensate for the revenue lost to these schemes. Insurance fraud costs the average US consumer an estimated $900 per year, mostly due to increased premiums.7
Litigation is, indeed, costly, and successful prosecutions are far from certain. Yet all 50 states and the District of Columbia regard insurance fraud as a crime for at least some types of insurance, and insurer fraud is a specific crime in 30 states.8
By keeping law enforcement in the dark, insurers empower criminals to retreat for a time, only to re-emerge in a new area running a more refined version of the same scam on a new insurer. What results is a high-dollar game of Whack-A-Mole.
The allegedly fraudulent life insurance policy issued to the 76-year-old Chinese native was a small piece in a much larger scheme that started simply. Federal charges were filed in the US District Court in New Jersey in early July 2025 against more than a dozen individuals and the company at the center of the alleged plot.
According to the charges, the subterfuge eventually involved hundreds of policies valued at more than $160 million obtained with falsified personal histories, fake medical reports, sham addresses, and forged signatures approved by notaries who were part of the scam.
At its core are two individuals who were approved to submit policies to an insurance company in October 2016. These two offered to help the insurer reach business owners in the Chinese American community who wanted insurance on their lives. The duo then connected its network of independent agents to the insurer.
From 2016 to 2024, that network submitted nearly 600 life insurance applications, which led to 250 policies with an aggregate face value of more than $160 million, according to the indictment. For their efforts, the company, its predecessor, and the agents who sold the policies were paid nearly $5 million in commission.
But like the 76-year-old’s policy, most were obtained on false pretenses, the indictment alleges. It details a conspiracy that amounted to illegal human-life wagering. In these schemes, third-party investors pay the premiums on policies issued to those who actually are uninsurable for a variety of reasons – from poor health and lack of income to primary residency in another country. In return, they receive payouts when the insured dies. In this case, the conspiracy allegedly involved physicians, paramedical examiners, and notaries, which provided an insulated circle of fraudsters who went unreported for years.
The case is now moving its way through the federal court system, with the defendants facing racketeering charges under the RICO statute most notably applied against the mafia and other organized crime enterprises.
High-profile fraud cases provide fertile ground for Monday morning quarterbacking – looking back to see what should have caused concerns. Major fraud cases such as this can have many signals along the way. Among them: (Click each arrow to learn more)
The case of Helen Golay and Olga Rutterschmidt is a chilling reminder that failure to act on early fraud signals can have lethal consequences.
In 1999, Paul Vados — a 73-year-old homeless man — was found dead in a Hollywood alley, the apparent victim of a hit-and-run. The women had met Vados through a church outreach program, offering him support while secretly applying for eight life insurance policies over two years.9
They claimed to be his relatives or fiancées on policy applications, despite having no legal or familial ties. The policies were stacked rapidly, with overlapping coverage and forged documentation. Vados had no income, assets, or known dependents, yet two unrelated women were repeatedly named as beneficiaries.
Six years later, Kenneth McDavid was killed in a staged hit-and-run. This time, investigators connected the dots, uncovering two dozen policies and a pattern of exploitation.10
Golay and Rutterschmidt ultimately collected more than $2.8 million before being convicted of murder and sentenced to life without parole.
This case underscores the need for cross-carrier fraud detection, real-time beneficiary tracking, and mandatory escalation when vulnerable individuals are repeatedly insured by unrelated parties.
The New Jersey case is not the only recent multimillion-dollar, highly organized fraud case to highlight the role law enforcement can play in sending a deterrence message. Recent cases in Chicago and New York are also making their way through the court system.
There are many commonalities in these three cases. Among them:
But perhaps more noteworthy than even those similarities is this one: Each case started much more simply than it ended up.
The journey to a millions-of-dollar fraud case begins with a single step. Red flags accumulate like debris in a rolling snowball that ultimately turns into an avalanche. Insurers and regulators who miss them – or fail to prosecute them – do so at their own peril.
Sometimes, the consequences are fatal (See related article, at right).
Among the keys to stamping out these high-dollar fraud schemes are widely publicized arrests, prosecutions, and criminal punishments that act as a deterrent for those who would follow in the incarcerated criminals’ footsteps. Failing to pursue prosecution by quietly denying applications, canceling policies, and terminating relationships with unethical brokers offers a free pass that enables criminals to hone their skills and victimize more insurers – and ultimately their customers.
