Five Scams That Drive Up Your Car Insurance Costs


Your good driving habits, combined with car insurance discounts like multi-policy, multi-vehicle and anti-theft devices can help you find cheap car insurance. But while you’re working hard to keep your premiums low, scam artists are driving costs higher. Even when the law catches up with them, we all pay the price for the activities of a growing number of rotten apples. Here are five popular car insurance scams according to the Coalition Against Insurance Fraud.

Dumping Unwanted Vehicles. Called  vehicle give-ups, this is the practice of fraudulently claiming car theft for the insurance money. The owner destroys or abandons the car, or sells it to an illegal chop shop and collects the insurance check.

Dishonest Registration. The driver takes out a post office box or registers a vehicle in another state or county where insurance premiums are typically lower, then lies to the insurance company claiming that the bogus address is his or her primary residence. These scams end up raising the cost of auto insurance for the genuine residents.

Lying on the Insurance Application. The Quality Planning Corporation estimated this fraudulent practice cost insurance companies $15.9 billion in 2009. In addition to the aforementioned dishonest registration, applicants lie about the mileage they drive, where they garage their car and what they use their vehicle for.

Staged Accidents. Often operated by rings, staged accidents cost insurance companies billions every year. One example of a staged accident is when a car driven by the scam artist (and often packed with his dishonest buddies) cuts you off and then slams on the brakes. The dishonest driver and passengers file claims for soft-tissue injuries like whiplash, which are hard to disprove medically. Your insurance pays the medical bills and every honest driver ends up paying the price in the form of higher premiums. Insurance companies and municipalities are cracking down with specialized task forces where these fraud rings are known to operate.

Body Shop Scams. Most repair shops are honest and you can find them by checking with your Better Business Bureau or asking your insurance company who they recommend. The bad guys endanger lives and run up everyone’s insurance premiums by doing substandard work, using inferior or used parts, and charging the insurance company for repairs they didn’t actually perform. 

You can help lower the cost of car insurance for yourself and everyone by reporting suspected fraud to your local police or your state’s insurance regulator.

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