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Publish Date - August 04, 2021

Author: Emily Andrews

Categories:   Tips & Insights For Car Buying    Useful Automotive Information   

Auto Insurance Scams And How to Avoid Them

Automotive insurance scams are rife, and while a lot of people assume that this sort of thing will never happen to them, there is every chance that you will get targeted by a fraudster at some point.

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Automotive insurance scams are rife, and while a lot of people assume that this sort of thing will never happen to them, there is every chance that you will get targeted by a fraudster at some point. The insurance industry is huge, and people see an opportunity to get tens of thousands of dollars from big insurers. Unfortunately, you may get caught up in one of these dishonest scams.

There are two types of insurance fraud, called either “hard fraud” or “soft fraud”.

Hard fraud comes from somebody planning a collision, accident, fire or theft. This is something that is covered by their insurers, so if they are involved in one of these then they may well be able to claim a big payment for a huge level of money. Hard fraud schemes may make it easy to steal thousands of dollars as criminal rings might be involved, causing larger accidents and claiming the maximum the policy might be eligible for.

Soft fraud is more of a common type of fraud, and it may be harder to discover, too. This sort of scam is simply exaggerating claims or claiming for more money than really needed. Other types of soft fraud include not stating certain issues that a vehicle may have had before or giving false information to the insurers to get a lower premium. As you can see, there are multiple ways in which people can game the system.

Below, we explore some of the most common auto insurance scams, and the ways that you can avoid the scams or try to protect yourself. We’ve also got information on how to find public information about a claimant to see if there are signs of potential issues, or a history of fraud from that person.

Most Common Auto Insurance Scams

Below, we delve into the five most common types of insurance scams.

Agent Fraud

This is when you are offered an insurance policy from a supposed broker who turns out not to be real, and not to have actually created a legitimate policy for you. This means when it is time to claim for a legitimate accident, you won’t have the insurance you need.

Staged Accidents

You may have seen some of the viral videos of this sort of thing. Staged accidents can come in multiple forms. It may be the policyholder deliberately having an accident so that they can claim the cost of their vehicle repairs or more on their policy. You may also see staged accidents involving people deliberately throwing themselves in front of cars that are moving slowly and claiming to be injured, or causing a crash and trying to claim on someone else’s policy. Gain as much information as you can if you suspect something like this is happening, if another car is involved, check the car history through VIN number lookup so you can see if there are any suspicious problems from its history.

Increased Damage

This is when someone is involved in an accident, and either exaggerates the level of damage to the vehicle, or their symptoms after an injury. This can make them eligible for higher financial support after the accident, which they have got fraudulently.

Phantom Passenger

This is when someone who was not actually on the scene of the accident gets involved. Someone may claim to have been caught up in an accident they have heard about and try to claim for car repairs as a result, or even for treatment for injuries. Some phantom passengers.

Bad Samaritans

The opposite of a good samaritan! This is someone who arrives at the scene of the accident claiming to be a lawyer or insurance agent, and seeming to offer their help. In fact, they are just looking to take advantage of someone in a desperate situation. Be wary of anyone who gets involved who you simply aren’t expecting to get involved. A stranger who approaches you might just want to help, but you don’t really have any way of knowing.

How to Protect Yourself

There are some things that you can do to make sure you are less likely to be involved in a scam. Below, we’ve got some top tips for protecting yourself.

Drive Carefully

This is always good advice. Drive as carefully as you possibly can. This way, you’ll know that you are less likely to have an accident, and less likely to get caught up in any insurance claims other people are making. Be on the lookout for people deliberately trying to collide with you.

Document Everything After The Incident

Once there has been an incident, you need to document absolutely everything. Our memories get blurry the longer it is after the event. Document and collect as much evidence as you can get including photographs. This can become crucial evidence and be the key to preventing you from being scammed. It can be the proof that you are telling the truth.

Instantly Alert Your Insurance Company

This helps to ensure you are talking to the right people the whole time, and that you don’t end up giving out details to a scammer. Only use the contact details your insurer gave you and don’t trust anyone who you can’t verify is an agent of that insurance company. This is another way to get scammed.

For Agents, Check the Car and Owner’s History

This is where it is best to check car history through VIN number lookups or use databases to find public information about claimants. Agents need to do their research when there is a potential claim. By learning about the history of the car and the person who owns it you may be able to see if they have a criminal record, or even things that they should have declared when they got the policy but failed to do so. Though these all may just be indicators of whether someone has been involved in scamming people pr insurance companies before, it can be very useful information. A little detective work can go a long way when it comes to insurance scams.

Report the Scam If You Become a Victim

It may surprise you to learn that a lot of people do not report the scams they’ve been a victim of. They may not realise that they have been scammed, but some people do realise, and through sheer embarrassment they fail to tell anyone.

The Department of Financial Services gives some excellent advice on fraud, and how to report it if you are a victim. You should always go directly to the insurer if you are an individual and you feel that someone is trying to scam you on your insurance policy and fraudulently get a payout. Big insurers may have whole departments dedicated to this. They’ll be able to investigate in the hope that the scammer gets caught and can’t do the same again. Fraud costs insurance companies millions.

Conclusion

Unfortunately, there are always people out there who are looking to scam others. In the world of insurance, these scammers are common. There are opportunities for large paydays if someone does manage to pull off an insurance scam.

Don’t be embarrassed if you find that you are suspicious of a scammer. It’s very possible for anyone to get scammed, and the best way to approach it is to try and be as safe as possible, reporting this scam to others and making sure they don’t have to deal with the same fate as you. Of course, avoiding scams altogether is best, and following our tips is the best way to make sure you aren’t caught up in legal issues that can take a lot of time and money. Insurance companies tend to have a way to deal with scammers effectively once it is reported.