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Fraud in Car Insurance

Mar 22, 2008
When thinking about car insurance scams, you may be thinking about the large companies that collect your monthly premium and then don't pay out on legitimate claims. However, the majority of auto insurance scams actually come from the person paying for the insurance. Ever wonder why your car insurance quote is as expensive as it is? Below, we will go over a few of the most common car insurance scams:

How about someone conveniently making a claim just as a major part is about to wear out? For example, just as the car's engine hits the 150,000 mile mark, an accident occurs that requires the engine to be replaced.

Some people will intentionally arrange to be in an accident. The crash is a low speed affair, but the driver claims that they have sustained major injuries and the insurance company has to pay out thousands in medical expenses. The scammer may even go so far as to claim that they have suffered a permanent disability that will keep them from ever working again.

A variation on this theme occurs when the driver stages the accident with passengers in the car. These passengers then also make claims and when they receive their settlements, pass along a percentage to the driver.

Perhaps the most common auto insurance scam is the person who gets into a smaller accident, and because they want the parts replaced and not repaired, they inflict additional damage after the accident.

The last form of fraud we'll cover isn't perpetrated by the car owner, but the repair shop that works on their car. Unscrupulous repair shops will charge outrageous rates for their work. Their assumption is that since it isn't coming out of your pocket, you won't notice or care if they overcharge.

There are two different techniques that the car insurance companies use to combat the scams. The first is through the use of deductibles. Because each person knows that at least some of the cost will be coming out of pocket, it insures that you only use the insurance when absolutely necessary. Also, when you use your insurance, you price goes up to be insured and you wont get a cheap car insurance quote for up to 7 years from an accident. The last way they combat fraud is by making it a criminal offense that will put you in jail if caught coming fraud.

In the end, though, the people who are hurt most by fraud are the innocent people who do nothing wrong. They are the ones who have to make up for fraud losses in the form of higher premiums. Because every auto insurance quote has some amount factored in for fraud.
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