People often wonder if they can cheat car insurance companies and get better insurance claims by not sharing all their information or in other ways. Do people usually do this? If they do, when do they choose to do it? Does this trick actually work?
Looking at the car insurance industry, some people try to hide or alter some details while filing claims or when they are obtaining a new policy, hoping this might lead to a decrease in their insurance premiums.
However, such attempts hardly work – but when they do can land you in trouble. For example, a Brooklyn Center man has been sentenced to 30 Months in prison for insurance fraud after staging a politically motivated arson attack.
Now, why is cheating an insurance company likely to fail? Because car insurance firms have a solid system that checks your driving history, your past claims, and your personal data. Moreover, these companies share their information in a database which makes it almost impossible for anyone to fool them.
On the legal side of things, lying to an insurance company, even to get better rates, is considered “insurance fraud”. This is a serious offense with severe repercussions. So, it’s always a good idea to stick to the truth and share accurate information with your insurer.
How to Cheat Car Insurance Companies
1. Applying for Insurance
There are two ways people typically try to cheat during the application process:
- Hide driving records. You can hide your previous tickets or accidents hoping to secure lower insurance rates. However, insurance companies can access your driving records electronically. If you leave out any information, you’ll initially get a quote based on incomplete data (say, $600). However, when the company eventually checks your record, the quote might increase to account for your actual driving history (for example, it may jump to $790).
- Hide household drivers. All household drivers, including your children, must be declared even if they have their own cars and insurance. If you don’t disclose all drivers, any claim related to an accident caused by an undisclosed driver will be denied on grounds of fraud. If you want to avoid extra costs for additional drivers, you can choose to exclude them from your policy. Remember, this also means they should never drive your cars, as there will be no coverage for them.
2. Falsely Declaring Vehicle Ownership
This happens when someone (a non-custodial parent or grandparent) buys a car for a child or grandchild, insures it under their policy, but doesn’t declare the actual driver. If the child causes an accident, it will be found out that the car’s garaging address and the known driver were falsely reported, which will lead to claim denial due to fraud.
3. Wrong Address Claims
You can try to cheat car insurance companies by providing a fake address for the car’s location. If you claim an accident and the supposed address of the car is hundreds of miles away, insurance companies will investigate.
If it’s found that you don’t live or ever appear at the given address, your claim will be denied due to fraud.
4. Claims on Pre-existing Damage or Issues
- Old damage. If your car has existing damage and you try to claim it after a new accident, the claim will be denied unless the new accident occurred in the same spot as the old damage.
- Non-working equipment. Trying to claim repairs for equipment like AC or radio that stopped working long before the accident will also be denied unless the accident can be proven to have caused these issues.
5. False Injury Claims
In some cases, you can feign injuries after an accident, hoping to get compensation. However, these attempts usually require a lot of time, effort, and sometimes even fake treatments, which may lead to lost pay or job.
Eventually, after the lawyer and doctor fees, the final amount you receive might be minimal (like $300).
6. Cheat Car Insurance Companies by Underwriting
This kind of fraud involves either hiding important risk information or giving incorrect information to reduce the insurance premium.
For instance, in a hard fraud scenario, someone may insure non-existent but registered vehicles and then file fraudulent claims on these vehicles. This is a clear case of fraud with the intent to cheat the insurer from the beginning.
On the softer side of fraud, a customer might try to appear as a lower-risk client than they are by pretending to have a better claims record. The goal here is to lower their premium and excess. It’s an unfair advantage but it doesn’t involve creating an additional fraud.
7. Claim Fraud
Claims fraud is quite common since it’s the point where the insurer pays out money. Here too, we see hard and soft frauds.
Hard fraud includes actions like purposely setting fire to a car to avoid mortgage payments or pushing a car off a cliff for a total loss claim. These are calculated actions with a clear intent to defraud.
In contrast, soft fraud might involve someone who has had a legitimate accident trying to inflate the damage to get a larger payout. This type of fraud is unfortunately common and some even consider it socially acceptable.
In all types of fraud, various parties can be involved, including:
- Third-party claimants
- Service providers (like vehicle manufacturers, garages, hospitals, doctors, surveyors, and advocates)
- Insurance channels (agents, brokers)
- Employees of the insurance company
- Legal entities misusing judicial powers
8. Abandoning Cars and Faking Theft
You can try to fool your insurance provider by disposing of your vehicle in ways such as leaving it in a random place, burning it, sinking it in a lake, or even selling it. You then claim the car was stolen. This can earn you money in two ways:
- From the insurance settlement for the “stolen” vehicle.
- From the sale of the original car.
9. Lie About Your Registration Location
The location where your car is registered can impact the amount of insurance premium you pay. In some cases, drivers living in high-risk or expensive areas choose to register their cars in states or counties with lower insurance premiums.
10. Inflate Repair Costs
This insurance fraud is usually committed by dishonest auto repair shops. When you take your damaged car for repairs, they might use used parts but charge the insurance company for new ones.
Sometimes, they even exaggerate the repair time to earn more money. Furthermore, they might overstate the damages to justify unnecessary repairs and get paid more.
11. Install Faulty Airbags
In certain cases, some repair shops don’t properly replace the airbag after an accident. They might use salvaged airbags or fix a deployed airbag onto a non-deployed steering wheel to increase the insurance payout. Some states, like California, have strict laws against such practices, and the penalties can include prison time and hefty fines.
12. Fake Windshield Replacement
Some people pose as windshield repair specialists and convince drivers that their windshields need replacement. They replace your perfectly good windshield with an inferior one, claim the cost from an insurance company, and may even increase the insurance rates. If you use your information to submit false claims, your insurance coverage could be at risk.
Industry Consequences You Should Know
Fraud isn’t victimless. The cost, about eighty billion dollars, is eventually passed on to all of us. To put that into perspective, this amount could finance global humanitarian aid for over three years. Alternatively, it could provide a year’s salary for 1.8 million working Americans.
Now, let’s look at a specific example to understand how car insurance fraud happens and its implications. For more case studies, you can check out the Coalitions Against Insurance Fraud website. They regularly update their social media feeds with new cases of revealed and prosecuted fraud.
It’s even better to actively avoid committing fraud and report any instances you come across to the authorities.
By the way, insurance claim handlers are pros at spotting fraud. So, the chances of successfully fooling them are low. Hence, it’s even better to direct your efforts toward honest practices and not cheat car insurance companies.
|What||Why it matters||What can be done|
|Car Insurance Fraud||It’s illegal, costly, and the expense is shared by all||Learn how to identify it, avoid engaging in it, and report any observed instances|