What You Need to Know About Car Insurance Scams

Car insurance scams are more prevalent than many would think. A study, conducted by the National Insurance Crime Bureau, found that the number of claims, suspected to be fraudulent, increased by 46% between 2008 and 2010. That’s a pretty significant increase for such a short amount of time. This leaves many consumers wondering whether these scams are affecting them.

Common Car Insurance Scams

In the past few years, criminals have invented some illegal, yet ingenious, ways to scam auto insurance companies. Some of these scams include:

  • Staged Automobile Accidents: Many scammers are now staging car accidents to collect money from their insurance company. Drivers may purposely cause an accident by forcing an innocent driver to hit their vehicle or team up with other scammers to orchestra larger accidents.
  • Falsely Claiming a Car as Stolen: Criminals may claim that their vehicle has been stolen when the car has been sold to an involved individual or entity.
  • Faking Expensive Injuries: According to the NCIB, many scammers are choosing to invent false injuries, since there is little risk of being discovered.
  • Soft” Insurance Fraud: Soft insurance fraud is when a driver embellishes their losses or injuries. Instead of orchestrating an entire event, drivers will simply take advantage of their situation. A driver may over-claim their lost wages, make multiple claims, or exaggerate injuries and damages.

How Car Insurance Scams Effect Innocent Consumers

What many consumers don’t realize is that insurance scams are affecting them–whether they realize it or not. In the last three years, the NCIB estimates that insurance rates have increased more than 24%. This increase is due to insurance scams, at least in part. Every insured driver is inadvertently affected by the actions of these scam artists.

Are Consumers the Only Ones Committing Fraud?

Another interesting fact is that drivers are not the only ones orchestrating insurance scams. Health care providers have been known to recommend expensive treatments in order to maximize their profits. Auto repair shops have also been known to take advantage of insurance companies. Repair shops may bills insurance companies for repairs that weren’t made, cause further damage to a vehicle, or charge an excessive amount for their services.

Insurance companies sometimes turn the tables by scamming consumers. An insurance company may refuse to pay an approved claim, delay payment, refuse a reasonable claim, refuse to investigate damage, or fail to provide the services outlined in their contract. The Consumer Federation of America has even warned consumers to look for payouts that are surprisingly low. The CFA was especially worried about “Colossus”, a new program that helps companies automate their claims system, while saving money at the customer’s expense.

Being aware of these scams is the first step towards protecting oneself. The hope is that, as awareness spreads, drivers will learn how to spot and prevent scams from taking place. The more drivers aware of the problem, the more difficult it will be for scammers to cash in at their expense.

Author Information: Miles Walker writes about car insurance quotes over at CarInsuranceComparison.org. His recent review looked at California car insurance.