According to a recent YouGov study, 95% of us knew “little” or “nothing” about car insurance fraud. Just like nobody really knew much about the Tinder Swindler until it was a show on Netflix.
However, car insurance fraud is more common than you think. Insurers lose time and money as a result of insurance fraud, which is passed on to drivers in the form of increased rates.
We’ll go over some of the most frequent types of insurance fraud. As well as how to prevent being a victim of a vehicle insurance scam or unwittingly committing insurance fraud.
What exactly is car insurance fraud?
Insurance fraud is defined as the “wrongful or unlawful deceit employed for financial advantage.”
In the field of car insurance, this generally entails providing false information to an insurer in order to receive a reduced premium, be paid more for a claim than you should, or get paid out when you shouldn’t.
Insurance fraud can be carried out in a variety of forms. There’s intentional fraud, unintentional fraud, and auto insurance scams that an unwitting motorist might fall for.
Car Insurance Scams to steer clear from
Let’s take a look at some prevalent vehicle insurance scam scenarios.
Abandoning a car
This is when someone intentionally hides or destroys their car, then files a claim on their insurance for the car’s worth. They’ll normally say the automobile was stolen, and they’ll probably sell components of their original vehicle to make money.
Nowadays, it’s a little more difficult to get away with it because modern cars have greater security systems, making them more difficult to steal.
When someone tries to make a claim on their insurance for car damage that occurred before they were covered, this is referred to as a “pre-existing condition.”
Some insurance scammers try to get previous damages covered under a new policy, while uninsured drivers try to seek coverage just after an accident to conceal the fact that they weren’t insured at the time.
When our clients sign up for coverage with us, we ask for a photo of their vehicle so that we can see how it appears at the start of their insurance.
Some con artists purposefully exaggerate the extent of an incident’s damage.
They might, for example, claim to be in more significant pain than they are. They may even claim that personal belongings that were damaged or lost were worth more than their genuine value.
This may be considered insurance fraud, particularly if the claim is significantly larger than the real loss.
This is not the same as negotiating. You won’t be prosecuted for fraud if your automobile has been written off and you’re simply discussing its worth with your insurer.
‘Crash for Cash’
This occurs when someone intentionally causes an accident by slamming into your car or suddenly brakes in front of you, causing you to collide with them. They’ll then try to make a claim against you.
This differs from staged accidents in that it involves unwitting drivers who aren’t part of the scheme.
Drivers seeking for a good price are offered phony insurance plans by ghost brokers. They aren’t legitimate insurers; they will either provide their victims fraudulent policy paperwork or acquire a real insurance policy on their behalf and then cancel it immediately.
They’ll frequently target folks who are more likely to spend extra for auto insurance, such as young drivers or those with points on their licence.
Victims of ghost broking may suffer catastrophic repercussions. They risk being left without insurance if they need to file a claim, as well as receiving a fine or points on their licence.
Many of us have gotten calls from an unknown number alleging that we have been in an accident.
They’ll generally claim you’re awarded compensation and ask for your personal information (usually your bank account information) so they can pay you.
It’s advisable to disregard them because they’re a con. Even if you’ve been in a car accident, you should call your insurance company right away. They’ll let you know when you need to contact them and how they’ll try to contact you.
How to avoid committing insurance fraud by accident
There are some less well-known instances of insurance fraud that may leave well-intentioned drivers in hot water, such as failing to notify your insurer of an important event or neglecting to update your information.
Don’t do the following:
You might be able to save money on your insurance by adding a more experienced friend or family as a second driver on their coverage.
However, it’s critical to be open about who the primary driver is. Fronting is when you have a parent listed as the primary driver on your insurance policy, but you do the most of the driving. This is considered insurance fraud.
When you get an insurance policy, you must provide accurate information about yourself, your driving history, your vehicle, and how you use the vehicle.
That’s because insurers evaluate that information to determine whether or not you can be insured and how much you’ll pay.
If any of this information is proven to be incorrect, it’s deemed a misdeclaration, and your insurer may refuse to pay out if you make a claim. It’s also possible that it’s insurance fraud.
Here is some of the most crucial information to double-check before purchasing insurance.
- Has your car been modified?
- Has a previous insurer canceled your policy?
- Have you notified your insurance company about any previous accidents, claims, points on your licence, or convictions?
- Do you use your car for work, business or personal purposes?
Don’t overlook the finer details
When buying insurance, your insurer will ask you several questions regarding your driving history and the vehicle.
Some of these particulars are a little more difficult to be certain about (like your annual mileage). And while you’re covered, some elements are more likely to alter (like your address, or marital status).
However, keeping your insurer up to date with this information is just as crucial — and failing to notify your insurer if and when your circumstances change might be deemed fraud.
If you meet with an accident or need to file a claim, contact your insurance company right away and tell them all you know about the incident.
Depending on your insurance company, you may be required to do so within 24 hours.
If you don’t, they may conclude that you are refusing to cooperate with the claims procedure. This might result in significant repercussions, such as a refusal to pay your claim or the cancellation of your policy. It may even be considered insurance fraud.
What are the consequences of insurance fraud?
Getting caught committing insurance fraud can have some serious repercussions.
Your insurance policy can be voided
This means that your insurer will cancel your policy and treat it as if it never existed. On the surface, this may not appear to be a major issue, but it might make finding cover in the future quite difficult. Many insurers will refuse to cover drivers who have had their policies cancelled in the past, and those who do will almost certainly charge much more.
You may receive licence points and a fine
Your insurance policy may not be considered legitimate if you have not been truthful about your insurance details.
This would legally indicate that you are uninsured, and your car might be confiscated and impounded as a result. You might also face a fine and 6 points on your licence.
Your claim will be rejected
Your insurer may “repudiate” a claim if your insurance information is proven to be incorrect after an accident or claim. This implies you’ll have to bear the fees yourself if they don’t pay out.
In some situations, you might need to pay the other driver’s costs, which can be extremely expensive.
How to avoid being a victim of car insurance scams?
Anyone is susceptible to becoming a victim of insurance fraud. However, there are a couple precautions you can take to reduce your chances of being a victim.
Buy directly from your insurer
Going directly to a registered insurer is the only method to ensure that you’re obtaining genuine coverage.
Keep your details up to date
As mentioned above, it is advised to always keep your insurer in the loop of any changes you make to your car or policy.
Get reliable, fast and affordable car insurance from Hala. Get a quote here!