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Spotting Scams: Looking Into Car Insurance Fraud

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“Victimless crime,” is this phrase applicable in insurance scams? With billions of dollars being lost on car insurance fraud alone, this is certainly not a victimless crime. From staged accidents to padding and everything in between; be it a fraudulent act initiated by the policyholder or other individuals involved in the process of claims including middlemen and professionals; scams have really evolved into an organized and complex case linking medical doctors, litigation lawyers, professional mechanics and even our finest policemen.

Auto insurance companies do pay claims made by their policyholders who got mixed up in accidents---whether it legal or otherwise. This is because more often than not, car insurance companies would rather pay out claims immediately than to be dragged and tied in court for years. If the accident reported seems to be legit, usually no further investigations will be made. 

This is the reason why insurance fraud has been escalating; same applies to the rate increase for car insurance premiums. What they lost in fraud claims will be passed on to you---to all those who faithfully pay their insurance policies.

Here are some of the schemes utilized to commit car insurance fraud. If one is familiar with such settings, same could be prevented.

Staged Accidents

When another car gets too close for comfort, be vigilant! The driver may be concocting a plan to coerce you to crash into his rear-end. Here’s the set-up. ‘Car X’ (scammer’s vehicle) drives at normal speed, waiting for another car to follow behind. While in transit the driver in ‘car X’ will suddenly hit the brakes causing an evident accident and damage to his car. Presto! An accident! Ka-ching! He’s on his way to cash out his premiums.

Another scenario is when a third party is given the wave or permission to pass. Said individual starts to move his vehicle, then ‘car x’ speeds up. Again, instant collision. Owner of ‘car x’ could easily deny that he gave a signal to the third party.

Self- Imposed Damages

This occurs when the driver wittingly causes more damage than what was incurred during the accident.  When no police exists in the crime scene, the higher the possibility that additional damages may take place. Remember, no documentation, no proof.

Padding

In this particular attempt, it is the professionals doing the dirty work. One example is when an attending physician deliberately provides unnecessary treatments to raise the amount that the insurance company must pay. When a doctor flat out miscodes diagnoses, that’s another form of padding. The situation can even be performed by a person pretending to be a doctor. Same applies to lawyers and mechanics trying to make money thru car insurance fraud.

Prevention

One should be vigilant as not be tangled in this intricate web of deception. With regard the staged accidents, one can do nothing but to be careful, very careful. When involved in a collision, make certain to call the police and document the same as not to trigger added damages. As for the professionals, check their credentials first. Ask organizations like the licensing board or the bar association.

By: Ette_Rual
Published: 11/14/08


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1 Posted Comments:

@ 1:13 pm 11/15/08 by Topper
I have car insurance. I pay for that insurance every 6 months. I pay the insurance company so that if/when I have an accident they pay me to get the car fixed. That is why you have car insurance. We had an accident a few years ago. I called the state troopers because the other party did not speak English. It turned out we all had the same insurance, same company. When we called our insurance company, they gave us a claim number and a phone number to call. We called the number, took the car to be inspected at a local branch of our insurance company, the gentlemen checked out the car, entered everything into his computer and printed us out a check. That's the reason you buy car insurance. They don't pay you out of fear of going to court!
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