What Is Auto Insurance Fraud?
Auto insurance fraud is often depicted in TV courtroom dramas where the plaintiff has a neck brace and complains about the defendant carelessly and recklessly ramming their car. Then the defendant's lawyer "accidentally" drops a briefcase causing the plaintiff to whip their head around thereby revealing the deception. This type of scenario is the most prevalent form of auto insurance fraud but it can also be perpetrated by organized crime rings cashing in on millions of dollars of fraudulent claims. Upwards of one third of all auto insurance claims may have some influence of fraud and deception.
Policyholder Fraud
Auto insurance fraud in its most basic form is simply trying to receive payment from an insurance company for a nonexistent or exaggerated claim of damage or injury. This type of fraud is perpetrated by either a single party such as the policyholder or scammer or in collusion between multiple parties seeking large sums of money. Policyholder fraud can range anywhere from destroying a low value vehicle and making a claim for more than the car was worth or claiming head and neck injuries, which is hard to disprove, while seeking thousands of dollars in compensation. There is also a more subtle type of fraud were the policyholder is certainly due some form of compensation but they try to receive more money than would normally be the case.
Third Party Fraud
Third-party fraud is more troublesome because it puts innocent drivers in harms way by unnecessarily causing accidents for the sole purpose of making a fraudulent auto insurance claim. Some of the most common types of third-party fraud include stopping short causing a driver from behind to ram the scammer's vehicle. Encouraging a driver to merge into traffic by waving them through and then pulling into traffic and causing an accident which will look like the other drivers fault. Using multiple vehicles to create a scenario where a driver is prevented from changing lanes while the scammer stops causing a collision. There are also scammers walking into traffic and feigning being hit by a vehicle. The possibilities and creativity are endless when it comes to third-party auto insurance fraud.
Insurance Company Fraud
Auto insurance fraud perpetrated by the insurer normally results in claims denial. It is highly profitable for insurance companies to collect as much in premiums as possible while paying out the fewest insurance claims. While not overly prevalent, since it would attract too much attention from consumers and regulators, it is still an all too common occurrence. Most auto insurance companies are worth billions of dollars and able to delay claims processing for months if they choose. It can therefore be difficult the challenge an insurance company you may think is committing fraud due to the limited financial and legal resources of most consumers. Fortunately, denied auto insurance claims can be appealed and a lawsuit can be filed if consumers feel they are being denied just compensation.
Protect Yourself
One of the best techniques for preventing or limiting auto insurance fraud is to thoroughly document an accident scene. Always call the police and request a copy of the police report once it is filed. Also, take as many photos and video as necessary since you won't get a second chance to document the accident. Ideally, you will be able to collect the personal information of any and all witnesses to the accident which may be crucial to limiting the influence of a scammer's claims. If your claim is denied, thoroughly review your insurance policy documentation to make sure additional procedures such as legal review or moderation are not being ignored. Auto insurance is meant to protect you in the event of an auto accident not like the pocket of criminals.
