Published July 2020
Would you know how to spot auto insurance fraud if it was happening to you? Here are common ways to help you spot fraud and avoid it.
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.
What is hard fraud?
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.
What is soft fraud?
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.
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.
How can I prevent car insurance fraud?
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.