5 Car Insurance Scams You Should Never Fall For

Don’t fall for staged accidents, fake injury claims, or airbag repair scams.
Written by Jason Unrau
Edited by Pat Roache
Auto insurance
scams are incredibly common, costing the average insurance customer an additional $400 to $700 in annual insurance premiums. Here are the most common car insurance scams to look out for.
  • Staging an accident: Scammers intentionally put themselves in a position to get hit by an unsuspecting driver so they can file a damage claim.
  • Faking an injury claim: Another driver claims phantom injuries after a car accident to claim medical expenses from your provider.
  • Crash for cash: Fraudsters use plausible fault to file fraudulent claims against your car insurance policy. 
  • Airbag repair scam: Your insurance company pays for OEM airbag replacements after a collision, but the body shop fakes the repair instead.

Scam 1: Staged accidents

A staged auto accident is a type of hard fraud that typically uses the following structure:
  • A scammer plans out an accident in advance for one unsuspecting party.
  • The goal is to make the accident look like
    you were at fault
    .
  • They file a claim with your
    property damage liability
    so they can write off their vehicle or get non-related repairs covered.
For example: 
  • A driver could be waiting to scoot behind you as you reverse out of a spot in a
    parking lot
  • A driver might wave you through at a
    four-way stop intersection
    , then enter the intersection at the same time as you, claiming you’re the party to blame. 
The end result: They
file a claim
, you get penalized, and they get away scot-free.

Scam 2: Faking an injury claim

Not every accident has injuries, but it’s plausible that someone gets hurt. One scam related to
car accident injuries
goes like this: 
  • The accident is legitimate or staged
  • The scammer looks to get a settlement through your
    bodily injury liability
    because they "got whiplash" or have "phantom pain" related to the accident.

Scam 3: The "crash for cash" scam

The "crash for cash" scam is a type of soft fraud where the scammer can take control of a minor accident and make
fraudulent insurance claims
against your policy.
For example: 
  • Someone cuts you off close, then slams on the brakes causing you to
    rear-end their car
    . You’re plausibly at fault in this situation, so the scammer can make whatever claims they want, so long as they're plausible.
  • A scammer gives you a phone number for a fake insurance agent who collects your insurance information and makes claims against your
    liability policy
    .
High-end cars are often targeted because the scammers expect they can scam more money in an insurance payout. 
Pro tip: Always document an accident scene and file a detailed police report with local law enforcement. You can also check an insurance agent’s license in the National Association of Insurance Commissioners’ (NAIC) consumer database. 

Scam 4: Airbag repair scam

The airbag scam is one of the most notorious and dangerous
car repair
insurance scams around:
  • Your insurer pays to replace
    original equipment manufacturer (OEM)
    airbags in your car after a collision.
  • The collision repair shop installs recycled parts or fills the space with other materials instead, then pockets the difference.
  • You drive away with an
    improperly installed airbag
    leaving you susceptible to major injuries and even fatalities in future accidents.
Key takeaway: Always ask for references and do online research to pick a trustworthy repair facility that will get your car back to proper pre-collision condition. It also doesn’t hurt to get your car inspected when you pick it up after repairs.

Scam 5: Rental car insurance scams

Unsavory rental agencies have been known to use pre-existing damage to collect off unsuspecting renters:
  • A rental car has damage from a previous driver that initially went unnoticed by the rental agency. 
  • They
    charge the rental car damages
    to the next driver rather than bite the bullet and pay the loss.
  • Your
    rental car insurance
    may cover the repair, but your rental contract will typically require you to pay for the vehicle downtime while the car is in the shop.
Expert tips to avoid rental scams:
  • Always ensure you have sufficient rental car insurance coverage.
  • Inspect and document any damage to the car before you sign the rental contract.

Effects of auto insurance fraud on providers and customers

Fraud schemes in the insurance industry are seen as victimless crimes that only affect car insurance companies, but they raise car insurance costs for all customers.
Consider the following statistics:
  • According to
    AAA
    , fraud is a factor in one of every three insurance claims. 
  • The FBI reports that policyholders pay $400 to $700 more in annual insurance rates due to false claims and other insurance scams.
  • The National Insurance Crime Bureau (NICB) reports that insurance fraud is the second most costly form of white collar fraud in the country.
The bottom line: Always stay alert while driving and thoroughly document collisions to lower your chances of becoming a victim of car insurance fraud. You’ll be helping yourself and your fellow drivers
save money on car insurance
.
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