Car Insurance Scams to Watch Out For
- The two main types of insurance scams
- What are some of the most common scams?
- Protecting yourself from scams
- What to do if you get scammed
- Where to actually find the best car insurance rates
The bad news: there are plenty of different types of car insurance scams out there to be wary of.
The good news: knowing what to look for and what to do can help you prevent common car insurance scams that could leave you paying higher rates for your premiums.
Keeping that in mind, the car insurance shopping app Jerry has put together all the information that you need to know about car insurance scams and what to do if you experience fraud.
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The two main types of insurance scams
When people attempt to defraud an insurance provider or the car insurance system it will either be considered soft insurance fraud or hard insurance fraud. Contrary to popular belief, insurance fraud is not a victimless crime. Insurance fraud often results in higher insurance premiums that insurance customers end up paying for.
Here are the two main types of insurance fraud.
Soft insurance fraud
It is possible to commit soft insurance fraud when buying car insurance or when making a claim.
If you provide false information to get a better price on your premium or to get accepted for a policy, this would be considered soft insurance fraud. For example, purposely not including a high-risk driver in your household on the policy, even though you know they’ll be using the car.
People can also commit soft fraud during the claims process when they knowingly exaggerate the damage caused by an otherwise valid accident. For example, if you tell the insurance company your windshield was cracked in an accident when you know it was cracked before—that would be soft fraud.
Hard insurance fraud
Hard insurance fraud is more deliberate and intentional—this makes it easier to catch, for the most part.
If you were to plan or stage an accident or bodily injury just so you could make a car insurance claim, that would be hard insurance fraud. The same goes for any deliberate acts of theft or arson that result in a claim.
An example of hard insurance fraud would be purposely trashing a car and making it look like an accident, and then taking the insurance payout when it is deemed a total loss.
What are some of the most common scams?
Soft or hard fraud—there are many different types of scams out there that car insurance customers could easily fall for. Here are some of the main ones to watch out for.
Fake injury claims
Fake injury claims happen when you get into an accident with a driver who exaggerates their injuries to get more money from the insurance company.
It might seem minor, but families could see their insurance policy increase by up to $700 a year for bodily injury liability claims.
The best way to avoid fake injury claims is to report any car accidents that you are involved in to the police - even if they seem minor. Distracted or busy drivers—such as parents—are most vulnerable to attracting drivers who might fake their injuries. An official police report will help nullify any exaggerated injury complaints.
Agent fraud is when you are scammed by an insurance agent who doesn’t fulfill their promises or add extra coverage to your policy.
The practice of adding additional coverage options that you didn’t agree to is called sliding—and it can cost you hundreds of extra dollars a year. Agents can also commit fraud by saying that they will set up a coverage option but pocket the cash instead.
It is important to always review your policy details thoroughly and carefully to make sure you are paying for everything you want and nothing you don’t.
First-time buyers and non-confrontational people in general tend to be especially vulnerable to agent fraud. Be wary of agents who seem pushy or are all too eager to get your personal details.
Even if you work with a trustworthy provider, mistakes can happen. Using an intelligent AI-based tool like Jerry is the easiest way to circumvent agent fraud and find a car insurance policy that is customized for you.
After providing you with a comprehensive cross-analysis of the best policies across providers, Jerry will handle the phone calls, paperwork, and renewals for your top pick so that you don’t have to.
Key Takeaway Fake injury claims and agent fraud are two of the most common types of insurance fraud you’re likely to encounter.
Insurance scammers will often plan and stage an accident involving other innocent drivers so that they can get a payout. Staged accidents tend to be one of the more intricate and well-planned insurance schemes out there.
Be sure to collect as much evidence as possible after an accident—especially if you suspect it was staged. It can be difficult for an innocent driver who gets caught up in these schemes to prove the fraud. Some scammers will even bring forth fake witnesses or doctors to back their stories.
Here are some of the most common types of accident staging schemes:
Drive down schemes
Drive down schemes usually happen at a corner or merge lane where a con artist will wave a driver on and then drive into their path. If the con artist gets hit, they can claim that the innocent driver was at fault for not yielding. Scammers might also coax a driver to make a left turn and then block the intersection to cause an accident.
Con artists might take advantage of unclearly marked turning lanes to sideswipe cars and cause accidents. Since the lanes aren’t clearly marked, it is easy for the scammer to argue that the innocent driver was at fault. Sideswipes usually happen in double-turn lanes, with the con artist hitting the other car from the outside lane.
Swoop and squat scams
Swoop and squats are schemes that force innocent drivers to rear-end a scammer’s car. Swoop and squat con artists will use two cars—one to drive in front of the target driver and the other to cut the car in front off, so it gets rear-ended. There may even be a third car that prevents passing. Once the vehicle in front is hit, the second car will dodge the scene, leaving the innocent driver at fault.
Panic stop cons
During a panic stop scam, a scammer will slow down or stop abruptly so they get rear-ended by the car behind them and can claim fake injuries. In many panic stop scams, the vehicle will be full of pretending victims, all of whom will claim their separate damages.
Key Takeaway Remember to collect as much evidence as possible if you’re involved in an accident, especially if you suspect it may have been staged.
Sometimes scammers will pose as “helpers”, arriving at the scene of an accident and pretending to be some kind of authority just to get your information. Fake helpers—aka “bad samaritans”—often pose as doctors, lawyers, or insurance experts. They will then use their supposed authority to get your personal insurance information. Once they do, they might file illegitimate claims that could significantly raise your premiums.
It is easy to feel disoriented and vulnerable after an accident, so don’t give your personal information to anybody who wasn’t directly involved. Watch out for people who arrive and seem overly eager to help or are asking a lot of questions. Many scammers will also try to distract victims from speaking to the police.
Key Takeaway If you’re involved in an accident, only give your personal information to the person who was directly involved in the accident—no one else.
Car repair fraud
Mechanics have specialized knowledge that makes it easy to overcharge for parts and services. Some mechanics might charge a high price for low-quality parts or insist on performing services that aren’t necessary. Some fraudsters might even charge for extra services that they don’t follow through on.
Most car insurance companies or auto clubs will provide a list of trusted mechanics in your area. Some insurers will also back claim-related repairs when done by a trusted mechanic. Sticking with providers listed by your insurance company is an easy way to help ensure that you don’t fall victim to car insurance fraud.
Key Takeaway Ask your insurer for a reputable list of mechanics to go to when you need car repairs.
Protecting yourself from scams
Car insurance scams can be a real pain, but there are things that you can do to better protect yourself against fraud, including driving defensively, collecting lots of evidence and getting an official report, amongst others. Here is some advice to help you protect yourself from car insurance scams.
Practice defensive driving
The most straightforward way to prevent an accident - even a staged one - is to drive cautiously and defensively. Driving at a reasonable speed will give you more time to react to a staged-accident scenario. It also helps to keep ample space between yourself and other vehicles so you will have time to respond to sudden stops.
If you want to improve your safe driving skills, consider taking advantage of the discounts and programs that insurance providers offer. Insurance companies often provide usage-based telematics programs to give you valuable feedback to improve your driving.
Or, you might be able to land an insurance discount for signing up for an approved defensive driving course offered in your area. If you’re looking for an ideal policy, Jerry is a free app that can collect quotes from up to 45 top insurance companies in seconds.
Get an official report
It is always a good idea to call the police if you are involved in an accident and need to make a claim. You are already legally required to call the police if the damage is likely to be $1000 or more.
However, it is a good idea to get an official report regardless,even if the damage seems minor.
Police reports will help invalidate bogus injury or damage claims and provide an authoritative account of the facts. If you only have your word against the scammer, you are more likely to end up getting burned than if you have a police report to help back your story.
Collect lots of evidence
The more notes and photos that you take down after an accident, the better. Photos help to establish the facts. Notes made at the scene can help back your story and support your claim. A dashcam might be a splurge, but it is one of the most effective ways to prove what happened.
Take lots of close-up photos of the damage, but also make sure to snap plenty of pictures that show the whole scene and the angle of the collision. Try to get any other parties involved in the accident in the photos as well.
Be wary of bystanders
Most bystanders to an accident will just want to help, but some could have less noble intentions. Accident scenes can often attract scammers and con artists looking to make a quick buck. Be especially wary of people who ask many questions, try to get your personal information or claim to be some kind of authority.
Likewise, make sure you call a reputable company if you require assistance or a tow. Sometimes dishonest tow truck drivers will try to arrive at an accident scene and charge an inflated price for their services.
Notify your insurance company ASAP
You should always reach out to your insurance company as soon as possible after an accident—but this is especially true if you suspect a scam.
Be sure to explicitly mention that you suspect fraud might be involved. The same goes for when you talk to the police.
Key Takeaway Reach out to your insurer as soon as possible after you’ve been involved in an accident.
If you think you might have been the victim of an insurance scam, you should report the incident to the National Insurance Crime Bureau (NICB).
The NICB may work with the police and your insurance carrier to investigate the fraud. No matter what, when you report a scam, you also make it less likely that it will happen again.
What to do if you get scammed
Getting scammed can be upsetting, but acting fast can help keep money in your pocket. Taking the following steps as soon as you suspect fraud will lessen your chances of getting burned.
Talk to your insurance company
If the circumstances around an accident feel suspect, report them to your insurance company.
Even if the claim turns out not to be fraudulent, you have nothing to lose by relaying your suspicions to your insurer. The sooner you report suspicious activity, the more likely your insurance company is to take it seriously. The agent can then take any necessary steps that may help resolve the issue.
Carefully document the scene
The more meticulously you document a suspicious accident scene, the better. Official records like receipts, photos, and invoices can often be used to refute bogus claims.
Be sure to keep your insurance policy, estimates, and records of payments evidence handy so that you can access them as needed. The claims process can take many weeks—even if fraud isn’t involved. You might want to consider setting up a dedicated filing cabinet to keep everything organized while your claim is processed.
Reach out to a reporting agency and consider legal action
Once you have spoken with the police and your insurance company, report the fraud to an official organization like NICB. They may perform an independent investigation that could help support your story. Official car insurance fraud reporting bureaus may also work with law enforcement and your insurance companies to help prevent the same scammer from striking again.
Depending on the specifics of your claim, you could also consider taking legal action. Be sure to talk to a lawyer to find out if you have a strong case before you pursue this option.
Where to actually find the best car insurance rates
If you are unlucky enough to get scammed, there is a good chance you’ll see your car insurance rates go up.Bogus claims rarely bode well for your premiums.
Using Jerry can help you save money by shopping around for the most affordable policy.
But who wants to waste endless hours filling out forms? If you’ve ever filled out a car insurance quote, you probably already know how miserable it can be.
Chances are you didn’t know all the answers. Maybe you called your mom for help. And, when you finished the form, you probably weren’t inspired to shop around and fill out more applications to make sure you were getting the best price.
Getting scammed is frustrating enough without having to pay too much for your car insurance. If you’re hesitant to switch plans or insurance providers because you’re worried about the work involved, don’t be.
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How do you report a car insurance fraud?
If you are involved in a suspicious accident, contact the police and your car insurance provider right away. Then you can reach out to a specialized institution to report the incident.
Here is a list of some official organizations that deal with car insurance fraud.
- The FBI
- the National Insurance Crime Bureau (NICB)
- the Coalition Against Insurance Fraud (CAIF)
- the National Association of Insurance Commissioners (NAIC)
What are at-risk groups for insurance fraud?
Some demographic groups may be more likely to be targeted for insurance fraud, such as women, luxury car drivers, seniors, and people driving work vehicles. In reality, though, anybody can be a victim.
How do you know you were involved in car insurance fraud?
Here are some giveaway characteristics or warning signs that insurance con artists tend to exhibit. These potential red flags might help uncover a fraudster.
- Might seem very knowledgeable about car accidents and car insurance claims - maybe unusually so
- Might cause accidents shortly after you purchase a new vehicle or upgrade your insurance policy
- Often have a history of making multiple insurance claims in a short period
- Will claim extensive damage or injuries but not get a police report
- Might file a legal letter of representation shortly after the accident
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