5 Car Auto Insurance Scams You need To Know

No matter what state you live in, rest assured that insurance fraud is illegal. Go Auto Insurance of Louisiana asserts “Honesty is the best policy” when it comes to dealing with insurance matters, and encourages its customers to comply with state insurance laws regarding fraud. Insurance fraud occurs when someone lies to or otherwise deceives an insurance company for some sort of financial gain. In some cases, fraud schemes are used to obtain money from insurance companies, and in other cases, fraud schemes are designed to avoid having to pay money to insurance companies. All forms of insurance fraud have one thing in common; they cause the cost of insurance to increase. Here are five common fraud schemes that insurers have to deal with regularly.

Faking a Theft

Theft losses can be a challenge to prove for an insurance company because in many cases there is a lack of evidence, other than the claim of the car owner that the vehicle is simply gone. If an insured is faking a theft claim, and asserts that the vehicle has been stolen, an investigation would have to prove this by establishing that the insured either hid, abandoned or voluntarily parted with the vehicle. In some cases, an insured will sell a vehicle, claim it was stolen, and then collect an insurance settlement on the same car.

Registration Fraud

Insurers utilize geographic data to determine insurance rates for the area where you live. Typically, those who live in busy city areas pay higher car insurance premiums because those areas experience higher accident, theft and vandalism incidents. Rates in these areas are often comparable to high-risk auto insurance in other states.

Enter Your Zip Code

Many who obtain car insurance quotes to compare try to avoid paying these higher rates by submitting fake address and residency information to their insurance company. If an insurer believes that you live in a low-risk area, they will charge you less for your auto insurance. However, when someone misleads an insurance company this way, they are breaking the law. This damaging practice has an adverse effect on those who actually do live in lower risk areas, as their insurance rates are likely to increase due to the perpetuation of this fraud.

If you make a material misrepresentation on your application for insurance, you can be cancelled as outlined by Tampa, FL agency Mr. Auto Insurance. It is important to be honest when you are obtaining a car insurance quote.

False Inflation of Repair Costs

Perpetuated primarily by unscrupulous repair shops, the cost of collision repairs are often faked in order to get more money out of an insurance company. This is often accomplished in two ways.

One type of fraud involves the use of used and/or aftermarket parts. While using off-brand or used replacement parts is legal, telling the customer and the insurance company that those parts were new and OEM parts is fraudulent. This type of scam nets repair shops a lot of dishonest profits, so insurers have utilized a regular practice of sending a trained appraiser to inspect damage vehicles and the parts that will be used to repair them.

Another type of fraud against insurance companies and customers of collision shops involves inflated repair estimates. Automobile repair appraisers are trained to determine the fair value of parts and labor charges associated with collision repairs, and in some cases when no appraisal is conducted, the collision shop will try to take advantage of the situation and inflate their estimate.

Baja Auto Insurance is a Texas auto insurance agent that operates in many different locations. If you are able to find a multi-location agency such as this, you may also find that they have solid recommendations regarding local, reliable and honest collision repair shops.

Airbag Repair Fraud

When a car is involved in an accident that causes the airbags to deploy, a large component of the repair cost will involve the replacement of the airbags. This can cost thousands of dollars to repair, but it will cost much less, if the repairer does not properly replace the airbags with new units.

A common fraud perpetuated by bad collision shops is to cover up the airbags and simply replace the dash and other components to “cover up” the faulty airbag replacement. In place of a functioning airbag, filler material of various types is used in its place. As long as the interior cosmetic repairs are completed properly, the car owner would never know that their repaired car actually contains no working airbags.

Staged Accidents

Many criminals will perpetuate a staged accident where an innocent victim is drawn into a collision situation by design. These are orchestrated to appear as if the true victim caused the accident. In most cases these will involve a car driven by a scammer who will pull in front of a victim and slam on their brakes in hopes of causing a rear-end collision. Since an insurer is unlikely to believe that someone would voluntarily place himself or herself in jeopardy this way, they will often assign blame to the innocent victim, and the real con artist will stand to collect money from the insurance company.

Fraud involving auto insurance is a criminal affair, but worse yet it can be dangerous to the victims of this crime in many of the scenarios mentioned above. It is important to be diligent about the existence of insurance fraud, and to report any suspected fraud to your insurance company, or directly to the state insurance department. Auto Owners Insurance Company of Michigan maintains a fraud-reporting link through their company website.

Filed in: Auto Insurance

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