Check Fraud is Rising: Why Paper Claim Payments Increase Risk

Nearly all insurers reported that fraud has increased over the past three years, with 45% reporting significant increases,¹ according to the most recent Coalition Against Insurance Fraud’s State of Insurance Fraud Technology Study.

That trend contains a payments dimension that the industry’s fraud controls have been slower to address. Checks, the payment method most commonly used for insurance disbursements, are also the payment method most commonly targeted by fraud.

According to the Association for Financial Professionals’ 2026 Payments Fraud and Control Survey, 58% of organizations reported check fraud in 2025, the highest rate of any payment type in the study.² At the same time, the infrastructure that checks depend on is under sustained attack.

The U.S. Postal Inspection Service (USPIS) reported a 139% increase in high-volume mail theft from mail receptacles between fiscal year 2019 and fiscal year 2023, driven primarily by organized criminal groups targeting check fraud.³

These aren’t isolated data points. They describe the same problem from two directions: the payment method most used for insurance disbursements is the payment method most commonly exploited by fraud, traveling through postal infrastructure that has become an active target for organized financial crime.

The question for carriers isn’t whether this risk exists. It’s whether their payment processes protect against it.

Checks Are the Most Targeted Payment Rail

In 2024, incidents of check fraud were reported by 63% of organizations compared to just 5% for digital payments (i.e., virtual cards, mobile wallets, and instant payments), the lowest of any payment method tracked,⁴ according to the AFP. That’s a 58-percentage-point gap between the payment method most used for insurance disbursements and one of the most secure alternatives available. For insurance professionals, who price risk for a living, that gap is difficult to rationalize.

The structural reasons for checks’ vulnerability aren’t hard to identify. A paper check carries static account credentials, travels through the mail unsecured, takes days to clear, and provides no real-time visibility once it’s in the mail stream.

Digital payments invert nearly every one of those vulnerabilities. Transactions leave full audit trails. Authorization and delivery are linked. There’s no physical instrument to intercept, no static data to compromise, and almost no window between issuance and delivery where a fraudster can intervene. In addition, the digital fraud prevention toolkit, with the latest in AI and machine learning, is far more robust.

Mail Theft and the Check Fraud Surge

The most concrete picture of how check-based payment fraud actually works in practice comes from the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). In a Financial Trend Analysis published in September 2024, FinCEN reported that in just six months, 841 financial institutions filed 15,417 Bank Secrecy Act reports tied to mail theft-related check fraud, reflecting more than $688 million in suspicious activity across all 50 states.⁵

That figure represents both completed and attempted transactions as reported by the filing institutions, not independently verified losses, but its scale reflects a systemic and widespread problem.

FinCEN identified three primary fraud methods from those reports:

• In 44% of cases, stolen checks were altered and deposited.
• In 26%, fraudsters used stolen checks as templates to produce counterfeit instruments.
• In 20%, checks were fraudulently signed and deposited without alteration.⁶

The sophistication ranged from simple forgery to organized operations using chemicals to wash ink from stolen checks, reprint them with new payees and inflated amounts, and deposit them remotely to avoid in-person detection.

The infrastructure being exploited is deteriorating fast. In addition to the 139% increase in high-volume mail theft previously mentioned, USPIS reports an 845% increase in letter carrier robberies over the same period, from 64 in 2019 to 605 incidents in 2023. The USPIS attributes this surge primarily to organized criminal groups targeting financially motivated crimes, specifically check fraud.⁸

For P&C insurers, this isn’t a banking industry problem that arrives at their doorstep by coincidence. High-value claim settlement checks are attractive targets precisely because they carry large dollar amounts, travel through the same mail infrastructure these reports describe, and often go to recipients in post-disaster environments where mail delivery is already under strain.

The 2025 AFP® Payments Fraud and Control Survey found that 23% of organizations experienced check fraud specifically due to USPS mailbox theft in 2024.⁹ During catastrophe response, when payment volumes spike and field operations stretch, those conditions get worse, not better.

Why Check Fraud Is Hard to Stop After Funds Are Released 

The National Insurance Crime Bureau’s emphasis on prevention over recovery reflects a fundamental economic reality of fraud management: Stopping a fraudulent payment before it clears is significantly less costly than recovering funds after they’ve been disbursed.¹⁰

When check fraud is detected after the fact, carriers face stop-payment processing, investigations, reissuance and extended claim payment timelines, which can lead to fines and penalties. These costs not only amplify the initial loss but also strain relationships with vendors, policyholders, and claimants, who desperately need funds to recover; they also impact the customer experience.

How Digital Insurance Payments Reduce Fraud Exposure

Digital payments don’t eliminate fraud risk. But they move the point of control upstream, closer to authorization and away from a physical mail stream that neither the carrier nor the recipient fully controls. Checks remain the only major payment rail that requires a carrier to release funds before confirming the payment has reached its intended recipient. In contrast, every other modern payment method is designed to close that gap by design.

For carriers still processing the majority of claim disbursements by check, the fraud data isn’t a warning about future risk. It’s a reflection of current operating conditions. The controls that safeguard pre-payment decisions don’t accompany a check, but they do with digital payments.

Take the next step toward insurance payment digitalization. Contact One Inc today to learn how to transform your operations, position your business for sustainable growth, and deliver an unmatched return on investment. Let’s talk.

Sources

1. Coalition Against Insurance Fraud and Shift Technology - Coalition’s 2024 State of Insurance Fraud Technology Study, December 10, 2024

2. Association for Financial Professionals, 2026 AFP® Payments Fraud and Control Survey Report – https://www.financialprofessionals.org/training-resources/resources/survey-research-economic-data/details/payments-fraud

3. U.S. Postal Inspection Service, Project Safe Delivery: Combating Mail Theft and Letter Carrier Robberies Strategy, March 2024 – https://www.uspis.gov/wp-content/uploads/2024/03/USPIS_Mail-Theft-Strategy-FINAL-3-13-24_v2-002.pdf

4. Association for Financial Professionals - 2025 AFP® Payments Fraud and Control Survey Report – https://www.AFPonline.org

5. U.S. Department of the Treasury, Financial Crimes Enforcement Network, Financial Crimes Enforcement Network, Financial Trend Analysis: Mail Theft-Related Check Fraud, September 2024 – https://www.fincen.gov/news/news-releases/fincen-issues-depth-analysis-check-fraud-related-mail-theft

6. Ibid.

7. U.S. Postal Inspection Service - Project Safe Delivery: Combating Mail Theft and Letter Carrier Robberies Strategy, March 2024

8. Ibid.

9. Association for Financial Professionals - 2025 AFP® Payments Fraud and Control Survey Report – https://www.AFPonline.org

10. National Insurance Crime Bureau, NICB Warns Consumers Nationwide: Insurance Fraud Is Coming for Your Pocketbook, November 5, 2025 – https://www.nicb.org/news/news-releases/nicb-warns-consumers-nationwide-insurance-fraud-coming-your-pocketbook