If you are like me, you are tired of seeing your premiums go up each year and a big reason why is because of the criminals that create false claims within the insurance industry. There are steps we can take to cut down on this problem, but we all need to take action and do our part.
Most people get frustrated when their provider sends them a notice telling them their rates are going up by 5% or 10% when they have not had an accident or ticket in years. Most think the company is being greedy and just trying to rake in as much profit as possible. That is however not entirely true. One of the main reasons why costs escalate and then get passed down to consumers in the way of higher rates is car ins fraud. This crime is big business and is the 2nd most common “white collar” crime in the USA, with thousands of people getting away with false claims each year. Nearly all of the big carriers have established investigative departments that combat this problem, but only a portion of portion of the criminals are caught.
Some recent figures point out that drivers spend over $300 in extra costs each year due to this type of fraud. So what are the most common ways these shady people rip off the carriers? Here are some of the main ways:
1. Owner ditching the vehicle
This is one of the most common frauds. It happens when a vehicle owner dumps the car, often in a lake or burns it. The claims are often hard to prove because the owner can just say it was stolen and investigators have a difficult job disproving many of these cases.
2. Fraudulent claim of a stolen vehicle
If the auto was sold prior to a report of it stolen, there are two types of games at play. The first is an intended settlement amount for the replacement cost of the automobile and then the actual sale reimbursement of the first car.
3. Inflated Repair and Replacement Costs
This scam is played out by dishonest repair shops. A worker might use cheap parts to fix the car but bill the insurer for top of the line expensive replacement parts. Some places even bill thousands for replacing airbags while never even putting in a new one. If caught doing this, a person can face up to 1 year in jail at thousands in fines.
Another popular scam is called the “golden hammer.” When a car comes in with minor damage, a hammer is sued to cause additional damage and inflate the claim. If you suspect any of this fraud going on from an auto body place, report it immediately to authorities, so these unscrupulous people can get charged and put out of business.
4. Falsifying Registration Information
The zip code region you live plays a big role in the premiums you pay for coverage. Many people use false addresses that have cheaper rates and lower auto theft. This is not ethical at all and can result in your insurance being cancelled. Always tell the truth about where you actually live when applying for auto ins.
5. Bad Windshield Replacements
Have you ever been approached in a parking lot by a stranger mechanic telling you about how your windshield is cracked and you face serious danger? There are literally people all over the country running this scam. They tell unsuspecting customers their insurer will pay for everything and they can do the job in just a few minutes. The real outcome is just another scam, with a cheap replacement windshield that is billed to the insurer of course at full price. Don’t fall for this rip-off. Always go to a certified repair center for all your automobile repairs.
Fight Back Against Fraud
The problem of auto insurance fraud is not going away anytime soon but we can all do out part to try and weed out as much of it as possible. If you see any of it going on, contact your state dept. of insurance and file a report right away. If more people did this, the criminals would be caught and everyone’s coverage costs would go down.