Insurance fraud may be defined as the intentional and knowing submission of a fake insurance claim or the purposeful embellishment of information in a legitimate claim.
It is a severe criminal activity that includes anything from apparently little deceptions, like not disclosing a claims history when applying for insurance, to major organized crimes, such as fabricating insurance-worthy incidents or making fictitious claims for damages that never happened.
According to estimates from the Federal Bureau of Investigation (FBI), insurance fraud results in losses that are transferred to customers totaling more than $40 billion annually. Due to fraud, the typical American household must spend an extra $400 to $700 in insurance premiums annually.
Fraud involving car insurance is very prevalent. The National Association of Insurance Commissioners (NAIC) estimates that the yearly cost of car theft fraud alone is $7.4 billion. This article discusses ways to prevent auto insurance fraud as well as its legal ramifications.
How to ensure that you’re not accidentally committing fraud?
James Velco, owner of TechNoir Solutions shares: “The financial future of you and your company might be severely harmed by the grave repercussions of insurance fraud.
But, as a sincere and honest company, there’s really no need to be afraid of being discovered by mistake.
Claim managers are here to assist you from various firms in getting payment for your claim as quickly and easily as possible; insurers are not there to attempt to con truthful individuals.
As a matter of fact, the great majority of claims are settled quickly, and if you have any doubts about the validity of your claim, you can always consult an expert beforehand. It is not dishonest to ask whether you have something to claim or not.”
Auto Insurance Fraud Types
Let’s now quickly review the many forms and instances of auto insurance fraud.
False Airbags
Indie Basi, founder of Wade says he faced this kind of fraud and shares: “When it comes to replacing airbags, technicians may easily deceive both the motorist and the insurance company.
After an accident, the technician will install defective airbags rather than new ones since nobody will be aware of the airbags until there is another accident.
However, they may also argue that even if it wasn’t necessary, the airbags had to be changed. They will add them to your claim bill without even replacing the ones that are already there.”
Staged accidents
There are other methods for drivers in the nation to cause accidents, such as applying the brakes suddenly while there is traffic behind them.
Staged collisions may be used to demonstrate that the motorist was not at fault while yet receiving a large settlement.
Fraud by agents
A driver or the organization may fall prey to agent fraud. Sometimes drivers pay the agents their premiums, and the agents take off with the money.
Both the driver and the firm will lose out in this scenario. However, the motorist most often obtains the coverage from the company by demonstrating that payment has been made.
Consequences of Auto Insurance Fraud
Jonathan Rosenfeld, owner of Rosenfeld Injury Lawyers shares: “The penalties for vehicle insurance fraud might be severe if you are ever found out. Most of the time, the repercussions are entirely reliant on many conditions and are not stated exactly.
The severity of your deception to the insurance company is the most crucial element. If your insurance company finds that your damage exaggeration amounted to a minor fraud, they may just penalize you for auto insurance fraud by raising your rate by a certain amount.
However, it is a big thing for any corporation to file a fraudulent claim for a circumstance or event that is wholly untrue. This may result in the insurer banning you, monetary penalties, and even prison time.”
How Can Auto Insurance Fraud Be Prevented?
Being a victim of fraud is unpleasant, as we are all aware. There are a few strategies we might take to guard against fraud:
When making applications or claims, be sincere
Lying on your claim application is wrong, even if it makes you appear more appealing.
Whether your spouse, parents, friends, agency, or any other person asks you to do anything doesn’t matter. Verify the claim in its entirety to ensure that it is accurate and free of fabrications.
Obtain A Photographic Assessment
A picture examination may significantly lower the likelihood of insurance payments. You’ll be required to provide the most current pictures of your car.
Currently, auto insurance companies are required by law in the majority of states to conduct a photo inspection by an outside provider.
Drive Cautiously
Following all traffic laws and using caution while driving is the best defense against vehicle insurance fraud. By doing this, you’ll be able to prevent auto accidents, which will eventually prevent you from submitting a claim.
Notify Your Provider
Tommy Mello, owner of A1 Garage recommends the following: “Notify your insurance provider right away if you think your agent or a technician is attempting to deceive you.
You won’t have to make a significant bogus claim since your insurance will take preventative measures.”
Report the fraud
It is your duty to alert others about scams as soon as you become aware of them.
You will be kept out of the picture and protected from any connection with the fraud by reporting it. Working with a mechanic or any other third party on a claim will not be held against the insurance company.
