What Auto Insurance Fraud Costs You

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Toy car wrapped in bubble wrap
The Invisible Threat
Imagine that you're driving along on a picture perfect day, minding your own business, Taylor Swift is on the radio and you're singing along happily. Suddenly, a car swerves in front of you and slams on the brakes. You have no time to react and ram into it. You spill your latte. Your car is damaged. You may have whiplash. And… you may be the victim of auto insurance fraud.
 
Because we all have auto insurance, the following article affects you directly. We are all paying more than we should because of auto insurance fraud. Each year, such fraud accounts for up to 14 percent of all auto premiums according to Bankrate. It slows down legitimate claims, increases your premiums, and according to the National Insurance Crime Bureau (NICB), auto insurance fraud is on the rise. So, what is it, what causes it, and more importantly, what does auto insurance fraud cost you? Let's find out.

What is Auto Insurance Fraud?

The official definition is: "a deliberate deception perpetrated against or by an insurance company or agent for the purpose of financial gain."

The most common frauds include false claims, staged accidents and billing scams. Insurance companies lump such acts into two categories: hard fraud and soft fraud
Hard fraud is an attempt to stage an accident, theft or arson, or other type of loss that would be covered under auto insurance. It can even include faking a physical injury. The most typical type of hard fraud is when someone claims their car has been stolen, when it really hasn't been stolen. People sometimes have their car stolen or set it on fire all in an attempt to get money from their insurance company.


Soft fraud is when a policyholder exaggerates a legitimate claim or conceals facts. This is often done to keep the insurance company from knowing certain facts such as that a teenage driver was driving and caused an accident. Another act of soft fraud is adding previous damage to a current claim such as suggesting that a minor dent or body damage was part of an accident when it really occurred a long time ago. 

The most common soft fraud is when a car is broken into and the insurer claims they had more expensive items such as smartphones or a laptop stolen in the vehicle robbery. Other forms of soft fraud involve conspiring with a body shop to pad a repair estimate, or conspiring with doctors to pad medical bills for unnecessary treatments. 


Prevent Auto Insurance Fraud

What can you do to protect yourself? If you're in an accident, make sure you document everything. First, stay calm. Calm yourself as best you can and start taking pictures. We all have cellphones with cameras these days so take a lot of photos of the accident. That means not just your car, but the car you came in contact with. Take photos of the accident sight, the damage, the other car's license plate, and the other driver. 

  • Document all accidents, take notes and keep all your paperwork together. 
  • Write down the name, address, phone number, driver's license number (even take a photo of it) and auto insurance information of the other driver. 
  • Get contact information on any witnesses to the accident. Call the police and file a police report - This can help save you from people who damage their car and yours on purpose as it offers documentation of the accident and the damage
Some people who stage insurance fraud accidents later smash their cars even more in order to get more money out of your insurance company. It sounds crazy, but it happens every day to good people just like you.