Types of Car Insurance Fraud- How to avoid

Introduction about Car Insurance Fraud- How to Avoid

If you purchase an insurance policy for your car, that means you agree on all the terms and conditions that the insurance company implies on the policy. The insurance company agrees to cover everything that includes all the damages you cause to your own car, another driver’s car, or any other property.

But sometimes the story turns out to be different as the National Insurance Crime Bureau says that in New York, every 1 out 3 insurance claims turn out to be a fraud. The numbers are even eviler in Los Angeles, the place that produces the most doubtful claims.

Another report mentioned top 10 cities with the most deceitful car claims are:

  • Miami
  • Los Angeles
  • Houston
  • Chicago
  • Philadelphia
  • Tampa
  • Cleveland
  • Orlando
  • New York
  • Boston 

Here are the tips to Protect Yourself from Car Insurance Frauds

car insurance fraud

Car Insurance Fraud – Identify the Difference

There are mainly two types of car insurance frauds. Hard insurance fraud and soft Insurance fraud.

  • A hard insurance fraud would be like selling a car, then claiming to the company that it was stolen to regain the money one has invested.
  • Soft fraud usually refers to an exaggerated incident of a real accident, also refers to misinterpretation on a car claim application.

Here are some common examples of car insurance frauds

Stolen Car False Reporting

When a car is stolen, your insurance company will assume it as your serious loss and covers it from your premium coverage. You can actually buy a new car from the actual cash value received (ACV) from your car insurance company. But, that’s not a claim that you can apply every time if, you get caught on falsifying your claim, then it may cause you a serious loss.

Exaggerating Claims

If you are caught in an accident and the other driver claims for old damages and scratches in order to receive more money from your insurance company, that is also a form of fraud.

Unfaithful auto repair shops can also be responsible for exaggerating the damages for the claim. If you take your car at a shop that is non-trustworthy after an accident and bill your insurance company to get extra money, then this is also a form of fraud.

Submitting an Application after an Accident

While submitting an application for car insurance, if you misrepresent the information like your zip code, driving history, or leaving to tell the company about a recent accident, then it will not help you in this regard because the insurance company will figure it out when they will look up your driving record.

It is mandatory to list down all the drivers you have at your home if you mistakenly or deliberately give your car to your teenager, and if they cause any damage to your insured car, then the company will not pay for the damage. And the claim for the reimbursement could be denied.

Agent Fraud

You cannot trust everyone if you are buying car insurance coverage via an agent. If the agent is not impartial and fair, he can charge you much.

It could be the worst situation when an agent cheats on you and has your premium and confidential information. The corrupt agent takes your money and doesn’t establish the coverage, so the time you need the insurance, after any mishap, you don’t have the coverage and, then you must bear the cost of damage yourself.

You have to remain vigilant throughout the process if you want to buy car insurance through an agent, investigating agents’ history and information and look out for what they are buying for you and will not slide you down.

To avoid being a victim of any agent, drivers should work with the trusted agent, take recommendations from peers. And always verify the coverage by yourself with the carrier.

Premium Bypassing 

Insurance holders are not that innocent when it comes to fraud. In most cases, customers intentionally mislead insurance companies by using false home addresses from a low premium area while registering their vehicle insurance.

The Insurance Information Institute says that misleads and frauds cost the car insurance company a loss of about $16 billion yearly.

Claiming Falsely- Get Ready to Provide Information

Every insurance company has a strong tracking system to identify and detect frauds. If you are claiming any insurance, then be ready to provide plenty of information about your accident. That may include police reports, photos, repair bills, medical bills, and witnesses. If you are filing an application for insurance, then you will also be assigned a claim adjuster. That claim adjuster will investigate the information you have provided to the company, and he will also decide how much your claim will be settled.

Insurance companies also use technology to detect fraud about the insurance policy, the legitimacy of insurance claims. If your auto insurance company identifies the fraud in your claims, then you may get into some serious trouble depending on the severity of the fraud.

Caught in Insurance Fraud

If you are caught due to a false claim, you can go to prison as well. But, in only the case if your insurance company refers the case to the law enforcement authorities.

If the insurance company discovers the false claim after reviewing your application with omitted information, your claim may be denied, or in some cases, your premium may be raised, and you have to pay a large amount as a penalty.

And if the scenarios become more serious than the insurance company can contact the law enforcement authorities, they will pursue the case and proceed with the rest of the requirements. They may sentenced you to jail, or in case of committing the fraud, you may have to pay hundreds of dollars.

Guide to Avoid Car Insurance Fraud

On the way to protect yourself from scams and frauds, here are some tips that you can consider reading:

  • Keep yourself away from these scams and be loyal when filing an application for car insurance.
  • If you suspect that you are becoming a victim of any fraud, then contact your insurance company or your Insurance department.
  • Describe all the incidents to the police and get a report from the police for every incident to prove your claim.
  • Capture pictures of the damages, passengers, and crime scene after the accident.
  • Note down credentials, addresses, other driver’s license numbers, car’s license plate numbers, witnesses, and the whole thing you think of about the accident.
  • Contact your lawyer and doctor in case of emergency, and get the bills from them to get through the proper process of claiming afterward. Don’t act on people’s advice who approaches you from the spot of an incident. If a doctor advises filing a special damage claim, then be certain.
  • Tell your insurer as early as possible. Don’t forget to inform your insurer about everything that happened and provide proof of everything you claim in the application.

FAQs

1- What happens when you misrepresent your information while filling an application?

Misleading on an insurance application is a fraud and is illegal. Insurers can put you in jail or can increase your premium rates, or charge you a penalty.

2- How much time can you get in jail for an insurance scam?

Depends on the seriousness of the fraud. You can be fined about $15,000 and 5 years in prison.

3-How can I identify a fraud?

You can recognize by recalling above mentioned fraud claims. In doubt, call your country’s National Insurance Crime Department.

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