These days you have to be pretty cautious and know who to trust. Every email, phone call or interaction could potentially be a scam looking to separate you from your money. In fact, the Coalition Against Insurance Fraud, estimates that insurance fraud steals at least $308.6 billion from American consumers every year. Auto insurance fraud is involved in about 10% of property-casualty insurance losses.
Insurance can be confusing and the times when you’ve had an accident or need a repair are often when you’re shaken up and less likely to be thinking clearly. Thus it’s good to be aware of some of the major insurance scams out there, so you know when to ask follow-up questions and when to steer clear.
Car accidents happen every day and they cost the insurance industry billions of dollars in claims each year. But some bad actors use this to their advantage. Staged accident scams, a prevalent and alarming form of insurance fraud, involve carefully planned and orchestrated road incidents intended to deceive insurance companies and extort money.
These perpetrators often work in organized networks, collaborating with tow truck drivers, medical professionals and legal representatives to maximize their profits. By feigning injuries or property damage, they file false insurance claims, driving up premiums for honest policyholders and putting additional strain on insurance companies.
Law enforcement agencies and insurance companies continuously strive to combat these fraudulent activities, employing sophisticated techniques to identify and prosecute those responsible for staging accidents.
Some common staged accident scams to look out for:
Drive down: When you are driving or about to make a turn especially into or out of a parking lot, a scammer will wave for you to go ahead but then block your way or cause you to hit another motorist. Even though the criminal caused the accident, if you were turning and hit another motorist, it can be hard to prove.
Swoop and squat: This involves two accomplices. Car 1 pulls in front of Car 2 and stops short causing it to slam on the brakes. Both of these cars are in on the scheme and the true victim is Car 3 who rear-ends Car 2. Car 1 drives off so the driver can’t be located, so the victim’s (Car 3’s) insurance is charged for the damages to Car 2.
Panic stop: This scam takes advantage of people’s distracted driving. A car will drive in front of potential victims and look for opportunities when they are distracted (say, looking at directions on a phone) and slam on the brakes causing an accident.
Jump-in: After an accident and the exchange of insurance information, a supposed passenger makes injury claims and wants your insurance company to pay for it, even though you’re pretty sure they weren’t involved in the accident and they’re making fraudulent claims.
How to avoid being scammed:
Don’t tailgate too closely and avoid distracted driving at the wheel.
Immediately call the police at the scene of an accident.
Use your phone to immediately take pictures and document details at the accident scene, like a head count of all people involved.
Auto repair scams
Auto repair scams are another fraud scheme in the automotive industry, preying on unsuspecting vehicle owners who lack extensive knowledge about their cars. In fact, a study by American Trucks found that the average car owner loses $832 to repair scam fraudsters.
Common scams include:
Upselling unnecessary repairs
Falsely diagnosing problems and exaggerating issues
Overcharging for parts or labor or using substandard parts while charging for premium ones
Claiming to make repairs that weren’t actually made
Bait and switch where the price quoted changes when the work is done
Such fraudulent practices drain the wallets of whoever is paying for the repair but also erode trust in genuine auto service providers. The repair shop might charge your auto insurance for the more expensive parts while putting in inferior parts. One example is airbag fraud, in which the repair shop uses a stolen, previously deployed airbag to replace a customer’s deployed airbag while billing your insurance company for a new one.
Get multiple opinions and quotes and choose reputable, certified repair shops with positive reviews.
Choose a shop that provides a written damage report and quote before any work is done.
Ask for a written warranty for any installed parts.
After an accident or if you become stranded on the roadside for another reason – such as an engine overheating or a tire blowout – the sudden appearance of a tow truck can feel like a miracle. But watch out, it could also be a scam!
Drivers each year are scammed out of hundreds of thousands of dollars due to bandit tow truck drivers. These are tow trucks that swoop in when they see stranded motorists and then hit them later with an inflated bill. They may also bring your vehicle to one of the dishonest repair shops above. Once your vehicle is in their control, they can essentially hold it hostage while demanding an insurance payout.
How to avoid being scammed:
Even if you’re shaken up after an accident, don’t let your vehicle go with a tow truck that you or the police didn’t call.
Get a quote (in writing) of not only the cost of the tow, but any additional fees (such as storage) that will apply.
Consider getting roadside assistance through your insurance company to help with future breakdowns.
The relationship between you and your car insurance company and agent should be one of trust. However, not all car insurance agents are worthy of that trust. Car insurance agent fraud involves deceitful practices carried out by insurance agents or brokers to maximize their profits at the expense of the customers.
These unscrupulous individuals may engage in various fraudulent activities such as:
Submitting false information on insurance applications
Exaggerating coverage benefits to persuade clients into purchasing unnecessary or overly expensive policies
Manipulating documents to inflate premiums or even create fake insurance policies, leaving customers without proper coverage in the event of an accident
Car insurance agent fraud not only results in financial losses for policyholders (such as through inflated insurance premiums) but can also lead to legal consequences and even jail time for the fraudulent agents involved.
How to avoid being scammed:
Verify the credentials of insurance agents
Carefully review policy documents, and report any suspicious activities to the insurance regulatory authorities
Read reviews and always work with reputable agencies. Be skeptical of prices that seem too good to be true
What to do if you think you’ve been scammed
If you believe you are the victim or witness of car insurance fraud, report it right away. You can call or report the fraud online to the National Insurance Crime Bureau (NICB). You will need to report as many details as you can about the date and location the fraud occurred, the vehicles and people involved and a description of the fraudulent activity that occurred.
Insurance fraud costs billions each year. From false claims to hard fraud, be on the lookout for some of the common types of car insurance fraud. One of the best ways to avoid being scammed is to always be vigilant. Give space to other drivers on the road, do your research on the best insurance companies and repair shops and get everything you can in writing.