What Is Car Insurance Fraud?

by Kyrana Jones

Owing a car, whether for fun or out of necessity, is a big responsibility. Regular checkups and maintenance are necessary in order to protect your investment and keep it running for a long time. Depending on how often and how far you drive the vehicle, the risk of potential damage or an accident is always looming. In order to be able to pay for damages or to replace the car, many people purchase car insurance. Many states have laws that require car owners to purchase insurance in order to offset losses caused by accidents and theft. Staging an accident or filing a false claim related to your vehicle for profit is car insurance fraud.

False Claims

Filing a claim for an injury not related to an accident, filing more than one claim for a single injury or reporting higher than actual repair costs are all forms of car insurance fraud. Individuals also commit fraud by submitting claims for non-existent injuries or exaggerated wage losses.

Staged Accidents

Some criminals target drivers with insurance in order to collect compensation from the insurance company. Their schemes include slamming on the brakes, often with the brake lights disabled, causing the victim to crash into the back of the vehicle. In addition, adding damage to a car after an accident in order to pay for additional repairs is a form of car insurance fraud.

Premium Evasion

Less obvious forms of fraud are often committed to keep insurance rates down for the car owner. They include registering the car in an area having lower rates or not listing all the actual drivers of the car. The driver's age and driving history strongly influence the cost of insurance based on the statistical possibility of the driver being involved in an accident. For example, teenagers are new drivers and are often subject to the distraction of having friends in the car, playing music or even eating. Statistically, teenagers may not be able to avoid an accident or may even be the cause of an accident due to inexperience.

Aftermarket Add-Ons

Additionally, the value of the car increases when adding or modifying the vehicle with aftermarket products. Spinners on the wheel covers, custom detailing or even specialty steering wheels increase the amount of insurance available for purchase. If the car is involved in an accident and declared a total loss, the insurance company will pay an amount determined by the policy. That means the insurance company now owns the car. Removing the specialty items after a claim is paid is insurance fraud and can result in forfeiture of the claim payment.

Who Really Pays?

Insurance fraud is more than stealing money from insurance companies. Fraud affects the lives of victims injured in staged accidents. Furthermore, insurance rates are determined using a number of factors, including the age of driver, the type of vehicle and the parking location. If incorrect rates apply due to misleading or false information at the time of the application, there might be a shortfall when accidents occur. Ultimately, the consumers pay by having to pay higher premiums, even if they have been claim free.

Drive Smart

Unfortunately, it is not possible for the consumer to avoid the consequences of insurance fraud. Insurance companies do investigate claims and will withhold payment or press charges when they discover fraud. It is hoped that the legal consequences will deter potential criminals. Individuals can avoid becoming a victim of staged accidents by being observant at all times and maintaining a safe distance from any vehicle. This will help keep you accident free, which may save you money in lower premiums.

About the Author

Kyrana Jones draws from her experience in newspaper publishing, medicine, retail management, marketing, pool and spa maintenance, insurance and financial industries to provide written content for newspapers and web resources. She holds an Associate of Arts in business and is the editor-in-chief of The Upshur Connection.