Insurance laws are complex and maybe you have found yourself asking, what exactly is insurance fraud and could I be guilty of it? This is a great question because it indicates that the person asking it wants to be sure they are legal and operating within state regulations and statutes.
Insurance fraud is not something that 95% of consumers particularly need to worry about, because they are above board and not involved in participating in insurance fraud. But, it is good to review what it is and how to avoid getting trapped into a situation that could be considered fraud upon you and your insurance company.
Notice that most, if not all, insurance companies do everything they can to keep premium rates as low as possible. It is never advantageous to create a rate structure which becomes burdensome to consumers, because in a competitive industry customers will just take their business elsewhere. Like any business, insurance companies have to earn enough premium income to pay their employees, rent or buy office space, pay their claims and fund for possible future liabilities.
Also, like any business, insurance companies can go out of business if they are lax about business practices, especially insurance fraud. Unfortunately, we live in a world, where the honest 95% of consumers have to pay for the dishonest 5%. Just like retail businesses, where companies have to pay for the cost of shoplifting through retail prices, insurance companies must allocate a certain amount of premium cost to insurance fraud.
What is insurance fraud? Are you guilty? How can I be sure? How can I protect myself from insurance fraud?
Lots of questions, lets take a look at some answers. Fraud can come in many ways and from different directions. Here are some of the main ones perpetrated by dishonest individuals.
Some of these scams can involve people that we all normally look up to in society, such as doctors, lawyers, accountants, and other professionals. Also, as you might suspect, there are many (a whole lot of) different ways for thieves and scam artists to commit fraud.
Here are several crimes perpetrated upon innocent drivers:
A scam driver slips in front of someone and deliberately slams on their brakes causing the innocent driver to run into the back of their car. They will then collect money for the accident, and sometimes will fake medical injuries as well.
Another one is called a scam or fake helper. They will wave an innocent driver into traffic acting like they are trying to be helpful and then crash into them claiming it was the innocent driver's fault and collect insurance funds from the accident. Advising drivers to a certain body shop, doctor, or lawyer where everyone is in on the deal is another fake helper scam.
Another scam is collecting funds by calling in a claim for a stolen car that is later, if ever, found burned or damaged beyond repair and the person receiving the claim was in on the thievery.
An offshoot of this one would be a calling in a car as stolen for a vehicle that needs quite a bit of repair work, then, after receiving the funds, finding the car and using the money to get it back in roadworthy shape again.
One scam is to add damage to a car that has been in an accident by causing quite a bit more damage to a car in another location before the adjuster sees it and then collecting an unlawful extra amount on the damage.
Some will claim a stolen vehicle only to have someone drive it out of the country into Mexico or Canada, then later after the claim has been paid it will be brought back into the country.
There are numerous fraud and scam schemes, but the main advice most investigators and officers give us as drivers is to be constantly alert to what is going on around us. If someone who is not a police officer waves you into a certain place or situation, be careful that it is legitimate, and do not necessarily automatically give up your responsibility to drive the car where you believe is the proper direction.
To prevent theft, remove ignition keys and lock unattended vehicles. In certain locations this is law, but wherever you are it is always good advice.
Do not unintentionally commit fraud by omitting facts to an insurer either. For example if you are asked about all licensed household members and leave off a newly licensed child just because you believe they should already be covered just under your policy without being listed then in some states you could be committing a form of insurance fraud called misrepresentation.
More apparent forms of misrepresentation is stating your address is different than where you live so that you get better rates or having someone register and insure your car under their name and leaving you off though you are the owner and primary driver. If you do this type of thing to obtain lower prices then you are not letting an insurance company determine their risks accurately and clearly misrepresenting the situation.
Insurance fraud has many different forms. Fraud can be as simple as misrepresenting facts on an insurance application or adding or inflating actual claims. Fraud also consists of serious offenses such as submitting claims for damages or injuries that never occurred or staging accidents or allowing a vehicle to be stolen just to collect on insurance on the vehicle while all the while knowing where it is.
CarInsurance.com is here to help you by making sure you are covered at all times. Let your claims adjuster know if you suspect fraud or some type of scam if you have an accident that requires the services of your policy. Our insurance companies and agents want to do everything possible to have your claims serviced quickly and efficiently.