5 types of car insurance fraud

According to the Insurance Information Institute (III), insurance fraud is a deception committed against an insurance company for financial gain. It can be anything from lying about a garaging address (the location where your vehicle is parked for most of the year) to exaggerating an accident to outright staging one. Fraud is illegal in all 50 states, and insurance companies work hard to investigate and expose fraudulent insurance claims.

Hard fraud refers to a situation in which someone plans or invents a loss for a claim payout. These crimes can result in jail time. Specific examples of hard fraud include:

• Staged auto accidents - When a driver plans to force another driver into a collision and a planted witness tells police the victim is at fault.
• Planned vehicle theft - When a car owner has a partner steal his car and sell, destroy or strip it for parts and then files a claim with an insurance company.

Soft fraud is more common than hard fraud and involves exaggerating certain aspects of an otherwise legitimate claim or lying when applying for a car insurance policy to get a lower rate. Soft fraud does more to increase premiums for other policyholders than hard fraud. Specific examples of soft fraud include:

• Missing drivers - When someone fails to inform his or her insurance company of all the drivers in the household.
• Over-reporting - When people inflate the value of equipment stolen or include old damage as part of a new claim.
• Lies about location - When people use someone else’s address to register and insure their cars because they know insurance rates are lower in that area.

1. Vehicle dumping, aka "give-up"
   This type of car insurance fraud occurs when the owner disposes of the vehicle by leaving it somewhere, burning it, dumping it in a lake or even selling it, and then claiming it was stolen. In situations where the car is sold before being reported stolen, the fraud is intended to pay in two ways: 1) through an insurance settlement to replace the stolen vehicle, and 2) through the sale of the original car.
2. False registration
   Where you live is one factor which may affect what you pay for car insurance. Drivers who take part in this scam often live-in expensive parts of the country or in neighborhoods with higher theft rates, so they register their cars in other states or counties where insurance premiums may be lower.
3. Exaggerated repair costs after a car accident
   This type of fraud is often committed by dishonest repair shops. Say you bring your car to the shop after an accident and the mechanics use used parts to make repairs. If they bill your car insurance company for new parts or say the work took longer than it did, they're committing fraud for financial gain. Body shops may also exaggerate repair costs by overcharging an insurer (and a customer) for necessary repairs. By purposely overstating the accident damages, the shop can make money from unneeded repairs.
4. Faulty airbag replacement
   This car repair scam happens when mechanics don't replace the airbag after an accident. According to the National Insurance Crime Bureau, questionable shops may use salvaged airbags to replace a customer's airbag. They may also affix a deployed airbag to a non-deployed steering wheel, making it look like the airbag deployed in order to increase the insurance claim payout. According to Consumer Reports, some states, like California, passed protective laws regarding airbag replacement. Replacing an airbag with a faulty one can be penalized by a year in prison and up to $5,000 in fines.
5. Faulty windshield replacement
   Windshield fraud can take unsuspecting drivers by surprise. Someone claiming to be a windshield repair specialist may approach you in a parking lot saying your windshield is damaged and needs to be replaced. They'll claim to have just the right kind of windshield on hand and that the service will be completely covered by your insurance company. This scam may also drive up your car insurance rates and possibly put you in danger. These "repair specialists" aren't the real deal and may replace your perfectly fine windshield with a shabby one. They may jeopardize your car insurance coverage if they use your insurance information to submit false claims for windshield replacement under your name.

Car insurance fraud is a serious and potentially dangerous criminal offense. If you suspect you're the victim of fraud, let your insurance company know. If you suspect you've seen fraud, get in touch with your state's department of insurance.

If you suspect insurance fraud, call 1-800-TEL-NICB to report it. Don’t hesitate to notify your insurance company if you become aware of fraud. Reporting fraud can help keep insurance premiums from going up and keep you and others protected.