How to Protect Yourself from Insurance Fraud

Car insurance fraud is increasing at an alarming rate, and it is affecting almost every, driver out there. If you … Continued

Car insurance fraud is increasing at an alarming rate, and it is affecting almost every, driver out there. If you are not involved directly, you will be affected by the rise in premium costs and extended waiting periods for insurance claims to be processed than it was previously. Those who are involved directly can be duped, and eventually, bear the detrimental effects on their driving records or sustain injuries from a staged accident.

The economic impact of insurance fraud is significant, as it costs Americans an average of $80 a year. Auto insurance fraud is one of the costliest and most dangerous forms because many people have been injured and have lost their lives in these scams. Staged accidents, inflated injuries, false registration, cracked windshield, and airbag replacement, and incorrect damage claims are some of the types of auto insurance claims that have been very costly in the end.

So, What is Insurance Fraud?

It is when an insurance company, consumer, adjuster or agent commits an intentional deception with the aim of acquiring an illegitimate claim. It can happen during buying, underwriting or selling insurance. Here are the types of insurance fraud and how you can protect yourself.

car insurance fraud

Types of Insurance Fraud

1. Fake and Exaggerated Claims

Phony insurance agents might defraud consumers by collecting premiums for nonexistent policies. Since the plans are bogus, the agents do not have the intention of paying up the claims from the onset. Most of the fake premiums are offered at a lower amount than the market rate. Consumers ought to be cautious before they purchase a policy to ensure they do not fall prey to such agents. One way of providing this is checking with the insurance company they claim to work for to ensure that the agents work for the firm. Remember to ask about their licensure.

2. Unlicensed Companies

Illegitimate companies who are not licensed by the state might mislead consumers into thinking that they sell insurance while they don’t. Since the companies are unregulated, the chances are that their policies are invalid.

3. Unauthorized Policies

Some licensed companies might introduce unauthorized policies. In most cases, discounted plans are unlicensed. So, as the consumers rush to get the low-cost policies, they end up paying premiums for a policy that is not recognized by the state.

4. Premium Embezzlement

Individuals working in reputable insurance firms can decide to cheat consumers for their gains. For instance, a fraudulent agent might collect premiums and fail to pass them over to the company.  The consumer thinks that the premiums are being handled appropriately and banks on using the cover when the need arises, yet the agent has squandered all the cash.

On the other hand, the company thinks that the policyholder is not meeting his end of the deal and either cancels or doesn’t renew the policy. If you do not receive a copy or your policy, an insurance ID card or receipts of your payments, it is a red sign that your premiums have not been remitted. As such, contact the insurer immediately.

5. Staged Accidents

Consumers can also be guilty of committing insurance fraud. When they deliberately attempt to stage an injury, accident or theft with the objective of claiming a ransom, they act against the law. Also, if a policyholder falsifies information filled out when applying for car insurance, it is a breach of contract, and they can be held liable.

6. Accident Repair Fraud

Another instance that a policyholder can commit insurance fraud is when they are repairing a vehicle that was involved in an accident. The auto mechanic might attempt to charge more money than is required for the fixing. If your mechanic requests to inflate your bill to cater for your deductible, they involve you in insurance fraud. You can seal this loophole by asking your insurer to recommend a reputable repair shop where you can take your vehicle for fixing. Also, ask the mechanic for a written damage report rather than a written cost estimate.

7. Inflated Claims

This is referred to as an opportunistic fraud, and it occurs when a policyholder exaggerates the claim’s worth with the aim of “getting their money’s worth” on insurance. Never claim more damage than there is. Insurance fraud causes an increase in the rate of premiums, and everyone is affected. An exaggerated claim is also considered a felony, and you could end up in jail for that.

8. Bogus Vehicle Thefts

This occurs when an individual lags behind on payments and reports that the car is stolen to get an insurance payoff.  Criminal rings may use this ideology to embezzle funds from insurance companies by buying policies for cars they are planning to lose afterward. They then trade the vehicles for weapons, drugs and the black market. If you suspect a fake theft incidence, report it to your law enforcement agency immediately.

car insurance policy

Tips to Protect Yourself from Insurance Fraud

There are multiple ways to fall casualty to car insurance fraud. Here is a guide on how to stay away from fraudsters.

Be a Smart Shopper

Buying car insurance is mandatory for every vehicle in the States. While it is vital in protecting drivers from the costly consequences of accidents, it also avails an opportunity for criminals to sell you fake insurance products.

Victims might realize that the insurance policy they purchased is invalid when they do not receive a proof of insurance card. Unfortunately, others know the truth when it is too late, such as after an accident or when the police have stopped them. Remember that driving without valid insurance is illegal, even when you do so unknowingly. It is upon you to ensure you have legitimate car insurance that is purchased from a credible company or agent.

Noticing auto insurance scams is a hurdle. Check these warning signs to look out for:

  • Take caution when dealing with insurance agents who move from door to door selling policies or those who solicit clients through telephone calls. Confirm their legibility with the insurance company.
  • Be wary of policies that are much lower than the market rate. It could be a scam. Some are legit but are filled with exclusions that you discover only when you need coverage.
  • Contact your state’s insurance department to check the legibility of the company and agent. They should be licensed.
  • Check the company’s rating at the Better Business Bureau.
  • Confirm whether the “free services” are hidden in your insurance bill.
  • Ask the insurer if they have invested in vehicle repair shops. If they have, it could be a red sign. Remember that you should not be forced to use them.
  • Take care of your insurance identification number in a similar way to your social security number because if it is stolen, criminals might use it as a scam.

Be a Cautious Driver

Staged auto accidents are not just dangerous to the drivers, but they put innocent road users at risk. Also, convicted offenders might end up in jail, and their coverage was withdrawn. They also face a penalty fee.

  • Install a dash cam. Using a dash camera will help you capture any accidents or incidents that occur when driving. That way, you have evidence of the event that you can use in a court proceeding.
  • Be suspicious of cars that pull in front of you, forcing you to follow at a dangerously close range. You might be set in for a staged accident.
  • Trust your instincts. If you feel like someone is tailing you or behaving suspiciously, pull into the nearest safe spot, such as a police, fire or gas station.
  • Carry your emergency kit at all times.

What To Do After An Accident

  • Exchange contact details with the person driving the car. Make sure you have their driving license number, proof of insurance and vehicle registration. Film the damage done to both cars.
  • Count the people in the vehicle, and ask for their names, phone numbers, and addresses.
  • Phone the police and explain what has happened. Make sure that the police report includes the officer’s name regardless of how minor the damage seems. This will make it difficult for a criminal to damage the vehicle and ask for a more significant claim later on. Note that in towns where the police are stretched thin, they might be unable to come to the accident scene unless injuries are reported.
  • Keep off people who appear at the scene and try to convince you to visit certain attorneys or doctors.
  • Do not fall for people who offer you cash to fix your vehicle.
  • Ask for detailed bills for any medical or repair services following an accident. Keep all your receipts as well.
  • Avoid physicians who advise you to file for a personal injury claim even if you are not injured.
  • Do not sign blank insurance claim forms.

buying a car insurance

Stop, Call, Confirm

If you are unsure about an insurance agent or company, do not sign the contract. Take time to find out more about the firm and write a check only when you are sure of their credibility. Confirm that the insurer is licensed and legitimate.

If you believe that you are a victim of insurance fraud, or are aware of an incidence of fraud, you need to file a complaint against the individual or company who committed the crime.

Related Post: GAP Insurance: Do I Need It?

Sources:

  1. Protect yourself from auto insurance fraud – Nationwide
  2. Insurance Fraud: Avoid Becoming a Victim – NY State Department of Financial Services