Insurance Hoax Explained: What You Need to Know About Auto Insurance Fraud

April 28, 2023

Slowing down the review of insurance claims, increasing premium payments, and putting drivers at risk — are the typical consequences of insurance fraud.

While it might seem that insurance scams cannot hurt anyone, rapidly increasing auto insurance rates prove otherwise.

With fraudsters regularly practicing their schemes, even cautious drivers are at risk. For instance, if a driver gets into a staged car accident, he can pay for the illegal activities of fraudsters. And while that might seem like a highly implausible situation, the possible financial implications require additional security measures and an understanding of typical deception techniques.

Understanding the Types of Fraud Schemes

Why is it crucial for drivers to understand what fraud is about? In a nutshell, careful driving can never guarantee a fraud-free environment or less exposure to fraud-related issues. In this case, a human factor is always behind the problem. While being insured implies being one step closer to financial stability, it cannot shield you from different types of insurance frauds or con artists, for that matter. If you choose to go uninsured, the implications of the fraud can be even more disastrous. To make sure that you pick appropriate coverage, use an American REIA. This way, you will see the bigger picture and make an informed decision.

Naturally, no one enjoys being conned or tricked into paying extra out of your insurance. And that is why every driver should be informed about the typical fraudulent schemes and keep an eye out. Automobile insurance fraud is often characterized as hard or soft when identified and reported. The latter can also be called a half-truth, misrepresentation, or an exaggeration of facts that typically results in illegal compensation.

For instance, a policyholder can overinflate the value of stolen personal belongings, use a friend’s address for registration purposes, or misstate the vehicle’s mileage. The typical examples of complex fraud cases are injury fraud, fake crashes, or planned auto theft. Even though the severity differs, both types are considered illegal and can result in jail time.

Identifying Cases of Car Insurance Fraud

To successfully avoid the typical fraudulent schemes, drivers need to stay alert and remember the common approaches used by fraudsters. The following list includes the most common components and scenarios used by con artists or policyholders themselves:

  • Unknown repair shops. This approach is based on inflicting additional damage to your car through the services of auto repair shops you have never used before. Another typical method is to request payments from different car insurance companies to cover the same auto damage.
  • Liability scam. Medical facilities use blank accident benefit forms and request policyholders to sign them in this case. And afterward, send bills to insurance companies requesting compensation for the never-provided services.
  • Purchase of a stolen vehicle. This scenario implies selling stolen automobiles illegally replaced registration plates to unsuspicious or inexperienced customers.
  • Staged accidents. The fraudsters cause collision accidents intentionally to benefit from false insurance claims.
  • Imitation of the theft. This approach implies staging a robbery and hiding your car to compensate for a stolen vehicle.
  • Simulated injury. In this case, a con artist imitates the injury that allegedly resulted from the impact of your car.

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Infographics source: https://isure.ca/inews/auto-insurance-fraud/

How Not to Fall Victim to Auto Insurance Fraud

Since anyone can unknowingly become a victim of auto insurance fraud, it is crucial to spot suspicious actions and understand how to act should the situation present itself. In case you witness, fall victim to or have any information about the potential crime, consider taking the following steps:

  1. Report a crime or submit an anonymous tip to the police.
  2. Submit a report to the local anti-fraud center.
  3. Understand your responsibilities and rights under the insurance policy.
  4. Double-check your insurance application after filling it out.
  5. In case of an accident, call the police right away, take pictures of the accident site, try recalling every little detail, and record it. If there were several people involved, memorize the suspicious behavior patterns, if there were any.
  6. When considering repair shops, stick with the ones you trust or request a recommendation from the insurance company.
  7. Avoid signing any documents at the accident site.
  8. If you suspect that a person you know or you are already drawn into a fraud, contact the police without delay.

The Key Takeaways

Naturally, the essence of auto insurance fraud is fluid and can take many forms. Whether you consider a slight exaggeration of your claim or an omission, bear in mind that any of these actions are illegal, and white lies are never safe.

Given that auto insurance fraud can involve anyone, be vigilant and attentive to details if an accident occurs. Besides, keep in mind that a recommendation from your insurance company is the only safe option.

Understanding your rights and the importance of accountability is crucial to being on the safe side. If you have any questions regarding your insurance policy or your rights under it, do not hesitate to contact the insurer hotline or its representative.

Victoria Berezhetska

Victoria Berezhetska is a Content Lead at Phonexa.com and an expert contributor to American REIA. She has a Bachelor of Science degree in Business Administration, with extensive working experience as a PR specialist and content writer. At American REIA, she helps customers find the right educational material through easily digestible blog posts and buying guides backing their insurance coverage choice. Victoria covers diverse topics around digital and insurance marketing, including auto, home, health, and life insurance.

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