8 common types of car insurance fraud

Common types of insurance fraud

Car insurance fraud can take many forms, but the goal is the same: getting money from an insurer by lying, exaggerating or hiding facts. The most common schemes involve fake thefts, staged damage, false injuries, padded repair bills and coverage bought after damage already happened. 

Below are eight common types of car insurance fraud and why insurers often catch them. 

1. Faking a car theft

The missed car payments are piling up, and you don’t know how to get out of them. It would be nice if the car was stolen so you could file a claim. But faking a theft, whether you hire someone to steal it and wreck it or conveniently leave the keys in the ignition in an unsavory location, rarely works.

A good SIU investigation includes a financial review to determine whether you're behind on payments, a check to see if you're missing a set of keys, and an assessment of whether there was forced entry into the vehicle. The National Motor Vehicle Title Information System (NMVTIS) assists law enforcement in preventing and deterring fraud. Investigators will likely request bank records, phone records, and any other resources that increase their chances of catching you.

2. Starting a fire and calling it an accident

A fire can create a total loss in a hurry, and some people might think they can get away with an accidental burning to make a claim. But with technologies like computer simulations and burn pattern analysis, it’s relatively easy for investigators to determine if a fire was arson vs. accidental.

3. Inflating your injuries

Inflating an injury claim means exaggerating pain, treatment, or recovery time to increase an insurance payout. Insurers review medical records, crash severity, treatment patterns, provider history, and whether the injuries match the accident. A claim can raise red flags when the treatment is excessive or inconsistent with the crash. 

Every SIU has medical experts who can tell if your injuries aren't serious enough to need lots of medical attention. In addition, they keep track of doctors who repeatedly provide excessive treatment or attorneys who repeatedly recommend certain clinics.

4. Faking injuries altogether

SIU accident investigators can tell what kind of damage you and your car will likely sustain from a collision. If you weren't hit hard enough or from the right angle, they'll know you're making a false auto insurance claim if you insist you have injuries that aren’t consistent with the evidence.

Again, an unscrupulous doctor might help you out, or a lawyer could help you sue for pain and suffering, but odds are good it won’t work out well for you.

5. Bringing forward witnesses who weren’t actually there

A fake witness can turn a disputed accident into an insurance fraud case. Asking a friend or relative to say they saw the crash when they did not is false testimony.

Insurers compare witness statements with police reports, photos, videos, dashcam footage, phone records and statements from the people involved. If the witness account changes or does not match the facts, it can trigger a fraud investigation.

6. Claiming that old damage was caused by the accident

Claiming old damage as new accident damage is fraud. A dent, scratch, or cracked part from an earlier incident cannot be added to a new claim.

Adjusters are trained to spot damage that does not match the accident. They may review rust, dirt, paint wear, repair history, photos, and the direction of impact. If the damage occurred before the covered accident, the insurer will deny that portion of the claim.

7. Getting a repair shop to pad the estimate

Maybe you have a buddy who runs a body shop, or you just happen to know a shop that’s got a reputation for being morally flexible. Having the repair shop add extras to the estimate to get the insurance company to write a bigger check than is necessary seems like a good way to make a few dollars off your claim. Unfortunately, insurance companies have their own experts to create repair estimates, and they’ll know when the numbers are way off base.

8. Buying insurance after the damage happens

You don’t carry comprehensive coverageComprehensive coverage helps pay for damage to your car caused by events other than a collision, such as theft, fire, vandalism, or natural disasters. It is subject to a deductible. to save money, and a tree branch just fell on your car, breaking the windshield and severely denting the hood. So, you call your auto insurance company and add comprehensive coverage, then file a claim a few days later.

Filing a claim right after you add or change coverage is a red flag for insurance companies. They’ll investigate, and odds are good they’ll find some evidence that the damage existed before the incident.

Insurance fraud carries hefty penalties

Car insurance fraud can lead to serious consequences. Insurers will deny the claim and may also cancel the policy, require repayment, or refer the case to law enforcement or a state fraud bureau.

Fraud penalties depend on state law and the amount involved. A small false claim can still lead to fines, restitution, and trouble getting insurance later. A larger or organized fraud scheme can lead to criminal charges and jail time.

Insurance fraud also raises costs for other drivers. The National Association of Insurance Commissioners (NAIC) says fraud costs consumers $308.6 billion a year, and FBI estimates show families pay thousands more over time because of insurance fraud.

The safest approach is to be honest, document your claim, and correct mistakes quickly.

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