Car insurance fraud is a vast and vital aspect you should know before applying for car insurance. Because car insurance fraud is a common error or mistake, people usually do here in the U.S, and it only keeps getting better. Therefore, car insurance fraud is a massive issue that frequently happens without notice.
What is Insurance Fraud?
At first, let’s find about what is insurance fraud? In auto insurance, usually, you sign a contract with an insurance company to protect you and your passengers from financial losses, which might happen due to a car accident or theft. However, some people try to deceive (by hiding information and provide false details) an insurance company to take unacceptable benefits and receive compensation. That is called insurance fraud. There are two Insurance fraud categories, which are known as Soft fraud and Hard fraud insurance.
Nonetheless, you might feel a white lie is harmless; most people think insurance fraud is a victimless crime where no one will get hurt. But, if you convicted of committing insurance fraud in the end, you might end up in jail, paying huge fines or even doing community service. Therefore, before you try to apply for car insurance, it is essential to know how you could avoid those and what is car insurance fraud.
Well, that’s precisely what I’m going to show you from this guide.
What is Car Insurance Fraud?
In the United States, car insurance fraud is becoming a serious problem from the past few years. Therefore, false insurance claims cost tens of billions of dollars every year. Any act that’s mean to obtain an undeserved financial claim classified as a fraud in auto insurance companies. Faking injuries from a car accident, fake car accident, or planning a collision are few examples of car insurance fraud.
Most Common Types of Insurance Frauds (Car Insurance)
- Deliberately setting your vehicle on fire or collision and collecting a complete insurance loss.
- Counterfeit airbags.
- Inflated auto losses.
- Provide fake automobile repair bills.
- Give false reports of a stolen vehicle.
- Claiming somebody stole your vehicle and requested money for its loss.
- Planting staged accidents and false claims of injury.
- Deliberately not listing drivers.
- Provide a false garaging address.
- Fake vehicle mileage. (miles traveled or used for enterprise)
- Windshield replacement rip-offs.
- To lower your premium, Lying on an application.
- Agent frauds. (Agents who steal your premium)
How Does Car Insurance Fraud Affect Drivers?
Unfortunately, car insurance fraud affects a large percentage of every driver’s overall expense. Yes, it is all drivers who follow the rules and abide by the law who are getting penalized. Therefore, it is irritating all of us need to pay for corrupt individual’s irresponsible actions. Insurance fraud is just not a victimless crime; it also will raise insurance premiums, slows down car insurance claims. It also takes money out of our state’s budgets putting innocent people’s lives in danger.
However, now you realize that doing such things may not go to hurt insurance companies but yourself. In that case, insurance companies usually raise their premiums to make sure they have enough funds available to cover you in case of insurance claims. Because it is an insurance firm’s responsibility to make sure they have enough funds to protect its insurers.
Since car insurance fraud is a huge issue, the penalties for being charged with fraud are extreme. The following factors will allow you to learn more regarding the problem that is car insurance coverage fraud.
Hard Insurance fraud
Hard insurance fraud is a way more severe offense than soft insurance fraud. Intentionally causing an accident, car theft, or planning an incident where insurance cash is at stake to receive that cash. Usually, this kind of insurance fraud is less common. However, it will still cost millions of dollars to insurance companies.
Soft Insurance Fraud
Soft insurance fraud is the most common insurance fraud factor. Committing this kind of insurance fraud is pretty simple and tough to detect.
For instance, let’s think someone was injured in a car accident. He intentionally pretends the injuries received were more severe and painful than they really have been. Therefore, due to that reason, they claim extra money this called soft insurance fraud.
As I mentioned earlier, it is pretty tough to determine the true extent of the harm. So opportunistic people will always take full advantage of this and often gain additional compensation proving their disability or pain.
Convictions for Car Insurance Fraud
The penalties for a conviction will differ according to state you reside. But, there are two auto insurance penalties. They are known as misdemeanors and felony auto insurance frauds.
Mostly auto insurance fraud convictions are misdemeanors. Usually, misdemeanor frauds consider as a soft fraud. For instance, Exaggeration on the claim, lie on an insurance application. With applications, lies can differ from where your car parked, using another person’s name to buy car insurance, lying about the seriousness of the injury.
The penalty for misdemeanor auto Insurance fraud can lead to probation, fine, or perhaps five years of maximum jail time. The fine will also change, relying on the seriousness of the offense. However, with a misdemeanor, it will not rise above 15,000 dollars.
Auto insurance fraud should contain property damage to qualify as a felony fraud. Burning property is what people usually do. For example, if someone owns an expensive vehicle which they can’t afford to keep up payments. They try to burn it by himself or paying someone else to do it, and a staged car accident where somebody died are few examples of a felony.
However, compared to a misdemeanor, penalties for felony auto insurance fraud are way more extreme. Most importantly, in these cases, insurance investigators will look at all the pieces (investigate) way more closely than misdemeanor frauds.
If anyone convicted felony will go to jail. Jail time will be between 5 to 10 years. Probation is unlikely in these cases. Not only that, but there should be a fined too, and it should be around 150,000 dollars. But, jail time or fine amount will decide according to your state.
What are the Penalties for Insurance Fraud?
Usually, the penalty for committing insurance fraud varies from state to state. When an individual caught committing insurance fraud, the penalties might be severe.
Nevertheless, in most states, soft fraud is considered a misdemeanor. But, there will be extreme penalties. Things like probation, fines, community service, and jail time are the penalties for car insurance fraud.
Hard fraud cases are always considered as felony auto insurance fraud. When someone is committing these hard frauds, penalties will be severe. They will sentence to a minimum of 1 year in jail, restitution payable to the insurance supplier, and they have to pay massive fines as well. Finally, whether it’s soft or hard a fraud case, premiums of all drivers are going to rise dramatically.
If you convicted of committing car insurance fraud, it would be a criminal activity. Generally, insurance fraud cases develop into criminal trails, uncovering many criminal actions that may carry severe legal ramifications.
How Major Auto Insurance Companies Deal With Auto insurance Fraud?
Auto insurance fraud is a huge problem for insurance companies these days. According to The Insurance Information Institute details, that almost all insurance companies use some sort of fraud prevention technology. And 67% of insurance providers use those to detect false claims. Fraud detection work is more and more dependent on data. Text mining or text data mining is one example of how the latest technology use to detect fraud insurance.
I have included here, how some leading auto insurance companies deals and investigate car insurance fraud;
Geico insurance company has an SIU (Special Investigations Unit). This unit has insurance experts who have law enforcement backgrounds. Their job is to look closely and examine suspicious claims.
Allstate insurance company has fraud investigators and SIU units to find insurance fraud. They are partners with law enforcement and regulatory agencies to assist in the investigation.
Progressive insurance has the SIU team too. They also have a tech solution known as Netreveal to find and support potential scums and organized fraud activities.
Like other insurance companies, Esurance has the SIU team, and they also have a fire and theft specialist team to analyze auto insurance frauds. The fire unit has its unique abilities and training. For instance, they identify the difference between accidents and intentional fires.
How to Avoid Insurance Frauds?
Insurance fraud is one of the United States’ most significant crimes. To avoid insurance frauds, whether it’s soft or hard insurance fraud, you have to be completely honest and unbiased when reporting claims. Because the penalties for both soft and hard insurance fraud are pretty severe.
How to Protect Yourself from Car Insurance Frauds?
I have included here a few tips for you about how to avoid car insurance fraud;
- Inform your insurance firm about the accident immediately.
- Report all accidents to the police.
- Take pictures of any kind of accident and its passengers.
- Gather all the details as much as possible. Like plate numbers, names, addresses, license numbers of opposite driver, and witnesses ID number.
- Take your lawyer’s and doctor’s ideas and don’t listen to others.
How to Report Insurance Frauds?
Finally, if you suspect a car insurance fraud, immediately contact your insurance provider or National Insurance Crime Bureau.
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