Scams have become part of everyday life. You can’t pump gas or answer the phone without worrying about someone trying to defraud you. Even when you’re shopping for the more boring products – like car insurance –  you’re bound to run into a few scams. 

These fraud cases cost the auto insurance industry billions of dollars every year in insurance claims. In turn, insurers stick policyholders with higher insurance premiums to make up for their losses. 

While you can’t change the way things are, you can proactively learn how to protect yourself against car insurance fraud and prevent it from happening.

What is auto insurance fraud?

How To Protect Yourself Against Car Insurance Scams - What is auto insurance fraud?

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Auto insurance fraud is defined as deception against an insurance company for financial gain. There are two main kinds of auto insurance fraud: soft insurance fraud and hard insurance fraud. 

Soft fraud

Soft insurance fraud happens when a claim is exaggerated for a bigger payout, or a consumer gives false information for a lower premium or to ensure application approval. This can be anything from an inflated repair cost and lying about damage to underreporting drivers or falsifying your vehicle’s mileage.

Hard fraud

Hard insurance fraud is a deliberate scam where someone intentionally creates a loss in order to file a claim. It could be staged accidents, auto theft, injury, or someone literally setting a car on fire (no, that’s not just in the movies!) to defraud an insurance company. Hard insurance fraud can result in serious jail time.

How to protect yourself from falling for a scam

How To Protect Yourself Against Car Insurance Scams - How to protect yourself from falling for a scam

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Not everyone is out to get you, but there are ways you can be vigilant to protect yourself against car insurance fraud.

Be skeptical of solicitors

Whether it’s a phone call, door-to-door salesperson, or an internet ad, be wary of unsolicited offers for insurance coverage. Con artists can pretend to be fake insurance agents in order to sell you an insurance policy at below-market insurance rates and then pocket the money. This could leave you uncovered and on the hook to pay out-of-pocket should an accident occur. 

To ensure that you are dealing with a legitimate agent, visit the Department of Insurance website for your state. There, you will be able to learn whether or not the agent you are dealing with is legitimate and licensed to sell insurance within your state. You will need the agent’s name and/or license number (which any reputable agent should be able to provide you) to do so.

Beware of promotional or low-cost insurance offers

You know the saying, “if it’s too good to be true, it probably is?” That applies here as well. Cheap insurance offers are rarely legitimate. Any policy that has inexplicably low rates likely lacks essential coverage or could be invalid. That’s not something you want to discover after the fact. 

Read more: The Average Cost Of Life Insurance By Age

Read the fine print and ask questions

Snoozefest, amirite? But a quick glance through the fine print could tip you off to potential fraud. Take a closer look at insurance policies, rates, and coverage prior to signing any contract. Doing this prevents an agent from sliding coverage into your policy and alerts you to fraud if required coverage in your state isn’t included. 

Ask questions if anything looks out of place and you don’t understand any of the exceptions or line items. Don’t be afraid to take your time to read it thoroughly. Fake agents will use pressure tactics or try to rush you. Licensed insurance agents will be able to explain everything in detail, provide official resources, and invite you to shop around if you’re unsure.

Protect your insurance information

A criminal can use your insurance identification and policy numbers along with your basic personal information to file fraudulent claims. Guard this information, and don’t give it out unless you’re dealing with your insurer directly or handling an official claim or report. Use caution if anyone else requests specific information about your policy. 

Install a dashcam

A dashcam records any collisions you have. It will serve as evidence for the insurance company and protect you should someone try to involve you in a staged accident scam. Dashcams can cost between $30 and $400. The higher-end ones can record around the majority of your vehicle and at night, but a low-budget camera is better than nothing.

Drive defensively

Defensive driving can prevent accidents and help you spot other drivers who may try to ensnare you in a staged accident trap. It’s especially important if you have a newer car or live in a state with no-fault or personal injury protection laws. 

Stay alert, and keep a safe distance between you and the other cars. In addition, avoid tailgating since it gives you less time to react if someone stops suddenly in front of you. 

Always file a police report, and get a copy

If you get into an accident, call the police to file a police report even if there is minimal to no damage. The police may not come if there are no reported injuries, but that shouldn’t stop you from filing a report. 

Police reports serve as official documents when you file an insurance claim. Having one makes it harder for a scammer to inflate damage or file a fake injury claim. Request a copy of the report for your records, and be sure the officer’s name is included on the report.

Document the scene of an accident

If you’re involved in a collision, take pictures and videos of the vehicles and any damage (your car, their car, and other property). Write down the make, model, color, and license plate numbers of all the vehicles involved. Doing this makes it harder for criminals to exaggerate or cause further damage for a more significant claim. 

Collect information

After an accident, exchange insurance, registration, and contact information with the other driver; count the number of people in the other car, and get their personal information. This information should include:

  • Name.
  • Address.
  • Phone number.
  • Driver’s license number.

While you are at it, be sure to get the contact information of any witnesses to the accident. Recording these details will make the police report more accurate and better protect you from any inflated or false claims.

Read more: Fender Bender? How To Handle A Minor Car Accident

Call your insurance company

Even if you’re not at fault, you’ll want to report the accident to your insurance company. Sometimes, people worry about their premiums going up if they call their insurance company, but notifying your carrier immediately can protect you in the event of any insurance fraud.

Plus, your insurer can recommend a reputable tow truck company so that you can avoid being confronted with any tow truck scams.

Read more: How Much Does Your Insurance Go Up After An Accident? (And 6 Ways To Reduce It)

Beware of bystanders and good samaritans

People who’ve just been in an accident are prime targets for scammers. Steer clear of anyone who approaches you and tries to direct you to a repair shop, attorney, physician, or tow service. Someone may even offer to fix your car for cash. All of these seemingly kind offers are tactics used by scammers to commit insurance fraud.

Choose tow truck services carefully

Avoid hopping into the first tow truck on the scene after an accident. Some tow truck drivers get kickbacks for taking damaged vehicles to shady body shops. Instead, direct the driver to the location or repair shop of your choosing. You can always ask your insurance company for a recommendation. 

Before accepting a tow service, check that the tow truck has a municipal licensing number. Read over any paperwork carefully before signing it and ask for a printed invoice that includes all service fees. 

Use reputable mechanics and request repair details

If you don’t have a trusted mechanic already, it is important to find a reputable repair shop. When you think that you have found one, check its Better Business Bureau rating and customer reviews. You can also learn how to find an affordable mechanic in our article here. 

In addition, always ask for a written estimate prior to service, and read over any quotes and itemized bills. Ask for the Original Equipment Manufacturer (OEM) part numbers for any repairs to ensure you receive brand new replacement parts.

Visit trusted physicians and legal professionals

Be wary of physicians who persuade you to file personal injury claims after an accident, especially if you’re not hurt—vet physicians and legal counsel the same as an insurance agent. 

Use the Federation of State Medical Board’s tool to verify a doctor’s license and medical background. For an attorney, check your state’s bar association directory. Every lawyer who is licensed to practice must be listed. It will show you if their license is active and list any ethical trouble they may have had. 

Report the scam

You can prevent further fraud by reporting any suspicious activity to the police as soon as possible. Whether you notify your insurance company or alert local or federal authorities, the sooner you act, the less damage a scammer can cause you and others. 

What to do if you’re a victim of car insurance fraud

How To Protect Yourself Against Car Insurance Scams - What to do if you're a victim of car insurance fraud

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Auto insurance fraud is a billion-dollar industry which means thousands of people fall victim to it every year. If you suspect that you’ve been a victim of auto insurance fraud, you should:

  • Call your insurance company to report the incident right away. This will help thwart the scam, prevent further fraud on your behalf, and allow your insurer to help resolve the problem.
  • Call the National Insurance Crime Bureau at 1-800-835-6422 or use their online form to report any fraud. The NICB partners with insurance companies and law enforcement to help identify, detect, and prosecute insurance criminals.
  • Contact your local police department, and file a report.
  • Report it to your local FBI office. Government agencies use these reports to track patterns, and they may be able to take legal action against a company. 

It’s not required, but as an option, you may:

  • Notify your state’s department of insurance.
  • File a claim with your state’s insurance regulator.
  • Notify your state’s consumer protection office.

If you discover insurance fraud after a claim has been paid out, you still have recourse. The statute of limitations on insurance fraud can be up to five years in some states. Contact your auto insurance company to open a case. You may be able to recoup some of the losses if they find fraud.

Summary

No one likes getting ripped off, which is why learning how to protect yourself against automobile insurance fraud is important. Car insurance fraud can spike premiums for you and everyone else. Always report suspicious behavior immediately to protect yourself, your family, and others.

Most importantly, trust your gut if something seems fishy or you see any red flags. Taking preventative measures may seem like a hassle at the time, but in the case of real fraud, you’ll be thanking your past self for looking out.

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