False car insurance claims are expensive and time-consuming for insurance providers to handle. That’s why all 50 states have made it illegal to file fraudulent auto insurance claims. If you’re a licensed and active driver, it’s important to understand false auto policy claims so that you can avoid committing these crimes and protect yourself against car scams.
What Are False Car Insurance Claims?
False car insurance claims are a type of insurance fraud. These claims occur when clients of an auto insurance provider attempt to trick the provider with false statements about auto-related events. Clients who make false car insurance claims make these claims hoping to profit financially from the insurance provider.
A driver who gets caught committing auto insurance fraud can face penalties of varying severity, depending on factors like the type of fraud committed and if they deliberately filed false claims. These penalties might include increased car insurance rates, violations added to their driving record, or even time spent in jail.
What Types of Fraud Car Insurance Claims Are There?
There are two primary types of car insurance fraud: hard fraud and soft fraud. Below are the definitions of each, along with some examples:
Hard fraud refers to deliberate situations involving false car insurance claims. Drivers who commit hard fraud either invent an imaginary scenario or purposefully set up an event that causes auto-related damage that they then make false claims about. Hard fraud is a more serious crime with more severe penalties than soft fraud. Examples of hard fraud include:
- Staged accidents: A staged accident occurs when one driver forces another into a collision. In this scenario, the driver who set up the accident typically also plants a witness who can falsely testify that the victimized driver is at fault for the accident.
- Planned auto theft: Planned auto theft means that a driver instructs someone else to steal their vehicle and subsequently damage, demolish, or strip it for parts.
A driver commits soft fraud when they tell lies or exaggerate about an actual auto-related incident. Although soft fraud isn’t as serious as hard fraud, it can still cause a driver’s auto insurance rates to drastically increase. The following are examples of soft fraud:
- Over-reporting: A driver risks over-reporting when they misreport how much damage an auto-related accident caused or how much repairs or replaced parts cost. Over-reporting can also occur if a driver makes a new claim to report about damage from a previous car incident.
- False claims about location: Another example of soft fraud is when people use addresses that aren’t theirs to register for auto insurance policies. Some clients submit this type of false information because they want cheaper insurance rates available to residents of other locations.
- Missing drivers: Missing drivers refers to an insured driver under-reporting how many drivers live in their household. A driver who commits this type of fraud does so intending to save money on their premiums, even though every state requires all licensed and active drivers to have their own auto coverage policy.
Scams Related to False Car Insurance Claims
Unfortunately, sometimes people pretend to be car repairers or sell faulty car parts in order to make a profit. If not caught in time, these scams can cost innocent drivers lots of time and money.
It’s important for car owners to be alert to these scams so that they can avoid falling prey to them. A few common auto scams drivers should watch out for include:
- Online sellers or shady auto shops offering counterfeit air bags
- Dishonest insurance agents who steal your premium payments
- People who pretend to be car mechanics and give customers faulty parts
- Towing companies that demand a fee just for them to give your vehicle back to you
How To Avoid Insurance Fraud
Committing auto insurance fraud can potentially raise your premium rates, put charges on your driving record, or result in criminal punishments. However, there are many strategies that savvy drivers can use to avoid accidentally filing false car insurance claims. Here’s some advice on how to reduce your chances of committing auto insurance fraud:
- Be honest on your application forms: When filling out your application or renewal forms for car insurance, be as truthful as possible. This includes honestly reporting your residential address, the make and model of your car, and any incidents from your driving record that the insurance provider requires you to report.
- Report events as they happened: When filing insurance claims forms, write about events exactly as they happened. If you’re unsure about a particular detail, it’s better to be honest with your insurance agent than to accidentally exaggerate.
- Document all incidents: Whenever possible, ask for and keep all documentation about auto-related events that require insurance claims or may require claims in the future. These documents may include receipts from auto body shops, invoices from manufacturers, police reports, and insurance paperwork from the clients of other providers involved in a collision with you.
- Purchase parts from the manufacturer: If you need to purchase new parts for your vehicle, order them directly from the dealer or manufacturer when possible. This reduces the risk of buying defective parts or parts made from substandard manufacturers.
- Keep your auto insurance data private: Do your best to keep all data related to your car coverage confidential. This might involve upgrading your cyber security system, getting a locked file cabinet, or asking for more details first if another company requests your auto insurance information.
How To Report False Car Insurance Claims
If you suspect that you or a family member have been the victim of auto insurance fraud, then call your coverage provider as soon as possible. You can also call the National Insurance Crime Bureau at 800-835-6422.
If you need help immediately for auto fraud, such as if you’ve just been in what you suspect is a staged accident, call your local or state police. They can help you fill out an accident report form. If possible, take lots of pictures of the incident, including the damage to your vehicle and the location of the event. If there were any witnesses to the collision, ask for their contact information.
Being the victim of false car insurance claims can be frightening. However, armed with this guide, you should be able to more easily protect yourself from potential car fraud by understanding how to identify various types of fraud and file detailed reports about auto incidents.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.