The short seller in a report said it had uncovered "extensive allegations of insurance fraud ignored by management despite being obvious and reported hundreds of times", including policies written for dead and fictitious people.
Reuters could not independently verify the claims in the report. Globe Life said it would issue a statement shortly.
Michelle Meyers, senior counsel at law firm Singleton Schreiber said the company would have to do damage control to avoid questions.
"I would expect that the regulators should take this exceptionally seriously," she added.
The company's shares were last down 35% after hitting its lowest since May 2020, making it the biggest loser on the benchmark S&P 500.
If losses hold, the plunge will wipe off over $3 billion from the insurer's market capitalization.
Short interest in Globe Life is at an estimated 2.99% of free float, according to data from Ortex.
Fuzzy Panda alleged that third-party policy sellers known to have committed insurance fraud contributed over 60% of the new business at Globe Life's American Income Life unit, which accounted for nearly half of the total underwriting margins last year.
The unit sells policies to labor unions, credit unions and associations.
Earlier in April, Nate Koppikar of hedge fund Orso Partners said Globe Life's book value was "inflated" and it was an "attractive" potential target for short selling.
In response, the company touted its sustainable earnings growth and said the articles Koppikar had referenced in his criticism of the company were inaccurate and misleading.
In the fourth quarter, Globe Life reported higher profit, driven by stronger underwriting and better returns on investments.
(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Shinjini Ganguli and Vijay Kishore)
By Manya Saini and Niket Nishant
