How to Protect Yourself from Auto Insurance Fraud
Auto insurance fraud is a billion-dollar problem in the U.S.
According to Verisk, personal lines automobile insurers suffer premium leakages of at least $29 billion per year. Auto insurance fraud has become a thriving business for people creative or desperate enough to try it. The problem is, many scammers get away with their fake claims, hurting the entire insurance industry, and honest policyholders.
Fraud makes it harder for everyone else because average Americans need to pay higher annual premiums for a situation they played no part in. If you’re paying tooth and nail for your auto insurance policy, part of the blame falls on the people who commit fraud.
What is Auto Insurance Fraud?
This type of fraud is the act of deceiving an insurance company for monetary gain. Automobile insurance fraud is the 2nd costliest white-collar crime in the United States and is illegal in all 50 states. If criminals pull out all the stops to make their claim look legit, insurance companies also throw their muscle around to investigate and expose these scammers.
Insurance fraud is an equal opportunity employer. The members are usually made up of formerly honest people manipulating the truth a little and organized crime syndicates who fleece insurance companies for millions of dollars. These crime rings have become extremely sophisticated over the years, making it harder for insurance companies to track and detect a majority of the false claims.
Types of Auto Insurance Fraud.
1. Staged Automobile Accidents
People will often stage a car accident, an injury, or even vehicle theft to file a claim.
2. Vehicle Dumping
This type of insurance fraud is also known as “owner give-up.” The owner of the vehicle tries to scam insurers by leaving the car somewhere on purpose, dumping it in a body of water, or even selling it. The person then reports that the car got stolen.
3. Inflated Insurance Claims
This type of fraud happens when a policyholder claims there’s more damage to the vehicle than there is.
4. Fake Insurance Agents
These people pass themselves off as legitimate insurance agents for large corporations and defraud consumers. They collect premiums for nonexistent policies offered at below-market rates. Be wary of agents who claim they can give you a price that’s too good to be true. Always check with the company if the agent exists.
5. False Registration
Your current residential address affects how much you pay for auto insurance. Locations with a high car theft rate have higher premiums, so people use this type of insurance fraud to mislead insurers and pay lower rates.
6. Unlicensed Companies Selling Unauthorized Policies
This scam is like the fake agent scheme, but it involves companies not licensed by the state to sell car insurance. They dupe people into buying low-cost policies, and since they don’t have a license, all these policies are invalid.
7. Padded Repair Costs After an Accident
Shady repair shops often exaggerate a vehicle’s damage to get more money. Some even use cheap, substandard parts and add labor costs for repairs that never happened. The insurer will then get a bill for brand new, original pieces that never made their way into the car.
|Total arrests involving motor vehicle crimes in first half of 2019:||281|
|Broken down as follows:||2||1%|
|False Proof of Insurance||69||25%|
|Bogus Auto Theft 3||34||12%|
Tips to Protect Yourself from Insurance Fraud
1. Never tailgate.
Criminals will take advantage of a tailgating car when they want to stage an accident.
2. Install a dashcam.
You’ll have proof of what happened.
3. Call the police.
If you’re involved in an accident or if you witnessed one.
4. Get a copy of the police report.
Get a copy with the attending officer’s name for any damage, even minor ones. A police report will make it harder for criminals to add more damage to the car so they can file a bigger claim.
5. Report the accident to your insurer immediately, even if you’re not at fault.
6. Use your phone to take pictures.
Take pictures of the accident, the damage and the number of people in the other vehicle.
7. Get essential details.
Such as the license plate, witnesses, and driver’s license numbers.
8. Stay clear of people who appear after an accident.
They will try to direct you to shady lawyers and doctors who’ll insist you file a personal injury claim even if you’re not hurt. You should always hire a lawyer you’re already familiar with to avoid any scams.
Auto insurance scams come in all shapes and sizes, from exaggerated auto claims to staged accidents. Follow these steps, don’t be a victim, and help put a stop to these crimes. False insurance claims make premiums higher for everybody, and nobody wins.