According to the FBI, non-health insurance fraud costs the U.S. more than $308 billion annually,taking between $400 and $700 out of the pockets of American families each year. Many scams are designed to simply take your money, while others – like staged accidents and fraudulent airbags – can put you directly in harm’s way. The following tips, from media outlet, MarketWatch, highlight some of the most common car insurance scams, as well as how to avoid them.
Staged Accidents
As a policyholder, it’s one thing to have your car insurance premiums increase because you caused an accident, but it can also happen when you’re the innocent victim of a fraud scheme. Staged accidents occur when a driver (sometimes with an accomplice) intentionally causes a collision to receive a fraudulent payout from an auto insurance company. Here are a few common ones to be aware of:
- Turn Drive Downs: There are several forms of this scam, all of which involve luring a driver into making a turn and then setting up a collision. One car might wave you on to make the turn and then block you from proceeding while another car collides with you. Either way, it ends with false claims that you were at fault.
- Wave Down: Two vehicles set up this scam where a driver is given a wave that it’s safe to pull out of a parking lot or side street. Once they’ve proceeded, the unwitting victim is then hit by the second car.
- Rear-End Collisions: These can take several forms, but often involve a scammer watching for the driver behind them to become distracted and then slamming on their brakes. There’s also the classic swoop and squat in which two drivers conspire to force your car into a rear-end collision. The first vehicle drives in front of your car and comes to a sudden stop when the second car abruptly pulls in front of them, causing you to hit the first car.
- Extra Damage: Drivers who stage accidents often cause extra damage to their vehicles after the collision to bump up their insurance claims.
- Past Posting: This scam involves manipulating paperwork to make it look like uninsured motorists had coverage when an accident occurred.
How To Avoid
You can protect yourself against staged accidents by avoiding tailgating and being wary of individuals offering unsolicited assistance. Sometimes there’s just no reason for another driver to wave you forward into a turn; err on the side of caution.
If you do get into an accident, staged or not, be sure to document all damage with your mobile device. Also, take note of how many occupants are in other vehicles.
Repair Scams
Auto repair scams can take many forms. Mechanics may use low-quality parts that lead to future repairs or simply perform unnecessary repairs. A scarier type of repair scam involves counterfeit airbags. To increase profits, unscrupulous repair shops use cheap knockoff airbags to rush unsafe cars back onto the road. These fraudulent airbags have a high likelihood of malfunctioning, sometimes releasing metal shrapnel when deployed.
Here are a few other common auto repair scams:
- Glass fraud: A random inspection from a glass technician or unsolicited offer to repair glass in your vehicle could be a warning sign.
- Chop shops: Stolen vehicles are sometimes disassembled for parts that are used in dishonest repair shops.
- Phantom repairs: Some repair shops may charge for extra services that weren’t performed.
How To Avoid
It’s always best to vet a repair shop prior to using them. Consider using repair facilities recommended by your insurance company, as they’re likely to have long track records of reliable work.
Towing Scams
Some shady towing services take cars and hold them hostage until you pay exorbitant fees. These scammers typically won’t give you clear information about their services or tell you how they were informed of your accident or breakdown.
How To Avoid
The best way to avoid this is by calling for towing assistance yourself. Your insurance company will have a list of preferred companies.
False Medical Claims
One of the more complex car insurance scams, medical practitioners actually get involved. In this case, scammers may forge medical bills, charge for unnecessary procedures or even sue for pain and suffering.
How To Avoid
Document everything you can at the scene of the accident. That way you have proof if you ever need to defend yourself against a phony medical claim.
Agent Fraud
Unfortunately, it’s possible you could encounter a dishonest insurance agent. Perhaps the most costly type of agent fraud involves stealing premiums. When this happens, your agent simply keeps your money and never sets up auto coverage. It’s only when you go to file a claim that you discover you have no coverage at all.
Other forms of insurance agent fraud include:
- Sliding: This is a term for slipping extra coverage into your policy without your knowledge. It can add hundreds of dollars to your premiums annually.
- Fee churning: In this type of fraud, intermediaries take commissions from reinsurance agreements. Your initial premium gets chipped away until there’s no money to cover claims.
How To Avoid
Before you work with an insurance agent, vet them by checking your state’s license database. You can also verify your coverage directly with your insurer.
How To Report a Car Insurance Scam: If you’ve been a victim of a car insurance scam or want to provide an anonymous tip about one, contact the National Insurance Crime Bureau (NICB). You can text “Fraud” to 847411 and include any details about the scam. You can also report a scam directly to your insurance company and local law enforcement.
When you report a car insurance scam, be sure to include:
- Details of the accident
- Any identifying details like a name or insurance policy number
- Car description or license plate number
- Physical descriptions of those involved
- Any specifics on why you suspect fraud
If you’re involved in an accident of any kind, be sure to take lots of photos and write down as many details as you can. If it turns out to be a case of car insurance fraud, you’ll have evidence on your side.
Source: MarketWatch
