Insurance Auto Fraud: A Costly And Criminal Claim

Insurance auto fraud claims are a serious issue, costing companies and consumers billions of dollars annually and causing higher insurance premiums for everyone. Auto insurance fraud can take many forms, from misrepresenting personal details on insurance applications to strategically planned schemes, such as staged accidents. Fraudulent activities affect the lives of innocent people, both directly through accidental or intentional injury or damage, and indirectly by the crimes leading to higher insurance premiums.

Staging accidents

There are several common schemes used to stage accidents. One is the "Swoop and Squat" scheme, which involves two cars: one swoops in front of the victim's car and stops suddenly, causing a rear-end collision, while the other drives beside the victim to prevent them from changing lanes to avoid the collision. Another is the "Panic Stop", which is similar to the 'Swoop and Squat' but involves a passenger in the offending vehicle who watches and waits for the victim to be distracted so they can't react in time. The perpetrator then slams on the brakes, causing a rear-end collision. The "Sideswipe" happens at intersections with dual left turn lanes, where the perpetrator drifts into the victim's lane and then rushes to crash into them, later claiming innocence. The "Start and Stop" is staged in gridlocked traffic, where the perpetrator in front of the victim starts to move forward, making the victim believe traffic is moving, then slams on the brakes, causing a collision. The "Wave-In" occurs when a driver waves the victim forward while they are changing lanes, then deliberately smashes into their car. The "Hit and Run" involves a suspect using a pre-damaged vehicle, driving it to a public location, and falsely reporting being involved in an accident.

There are several red flags that may indicate you have been a victim of a staged accident. These include the other driver acting strangely, being prevented from changing lanes, driving in a wealthy neighbourhood, exaggerated injury claims, and being a senior or young woman driving alone.

To protect yourself from staged accidents, it is recommended to get a dashcam to record what happens before an accident, document and identify all damage and individuals involved, and call the police to get an official report. Do not give the other driver cash or payment, and always go through your car insurance if you suspect fraud.

Counterfeit parts

The use of counterfeit parts can also have financial implications. Insurance fraud involving counterfeit parts adds billions of dollars to insurance claims, resulting in higher premiums for everyone. Repair shops may charge for quality, new parts but install used or aftermarket replacements, or even leave the damaged parts as they are and bill for new ones. Airbag scams are a notable example, with some shops replacing airbags with cheap knock-offs or even cardboard and billing the insurance company for legitimate replacements.

To protect yourself from counterfeit parts, it is important to be vigilant when selecting replacement parts for your vehicle. Purchase items from reputable stores and suppliers, and consider buying Original Equipment Manufacturer (OEM) parts directly from your car dealership. Compare item pricing—if it seems too good to be true, it might be a counterfeit. You can also look for anomalies by comparing the part to the one you are replacing, checking for differences in wiring colours and locations, for example.

Fraudulent health insurance claims

Insurance fraud is a serious issue, with auto insurance fraud costing Americans over $300 billion a year. While auto insurance fraud is a significant problem, health insurance fraud is also a pressing issue. Health insurance fraud is committed by both medical providers and patients, and it can take many forms, including:

• Double billing: Submitting multiple claims for the same service.
• Phantom billing: Billing for a service that was never provided.
• Unbundling: Submitting multiple bills for a single service.
• Upcoding: Billing for a more expensive service than was provided.
• Forgery: Creating or using forged prescriptions.
• Diversion: Diverting legal prescriptions for illegal use.
• Doctor shopping: Visiting multiple providers to obtain prescriptions for controlled substances.

Health insurance fraud can also involve the abuse and resale of prescription drugs, such as opioids. This type of fraud has devastating consequences, including tens of thousands of lives lost to addiction each year.

Medical identity theft is another form of health insurance fraud, where an individual's name or other identifying information is used without their consent to obtain medical services or submit false insurance claims. This can result in erroneous information being added to medical records or the creation of fictitious records. Victims of medical identity theft may receive incorrect medical treatment, become uninsurable, or find themselves diagnosed with conditions they do not have.

Health insurance fraud carries severe penalties, including jail time and significant fines. For example, in Michigan, health insurance fraud is considered a felony, punishable by up to four years in prison and up to $50,000 in fines. Additionally, those found guilty must bear the stigma and limitations of being a convicted felon.

To avoid becoming a victim of health insurance fraud, individuals should protect their health insurance information, be cautious of "free" services, and regularly review their explanation of benefits (EOB) to ensure accuracy.

Premium evasion

According to the Insurance Information Institute, premium evasion is a serious issue that costs the average US family between $400 and $700 per year in additional premiums. Furthermore, a 2017 study by Verisk found that premium leakage, resulting from omitted or misstated underwriting information, costs auto insurers at least $29 billion annually. This leads to higher premiums for honest drivers, who ultimately bear the cost of premium evasion.

To combat premium evasion, insurers and law enforcement agencies rely on advanced technologies, such as predictive analytics and artificial intelligence, to identify and investigate suspicious claims. Additionally, all states in the US have enacted laws that classify insurance fraud as a crime and provide immunity for reporting such fraud. These measures aim to deter and prosecute individuals who engage in premium evasion and other types of insurance fraud.

Fraudulent property insurance claims

Insurance fraud is a serious issue, with severe penalties for offenders, including jail time. Fraudulent property insurance claims can take many forms, and it is important to be aware of the different types of scams to avoid falling victim to them. Here are some common types of fraudulent property insurance claims:

Exaggerating or "Padding" Claims

This involves inflating the extent of damage or loss to receive a higher insurance payout. For example, claiming that stolen items during a burglary were more valuable than they actually were, or exaggerating the cost of repairs needed after a covered peril.

Lying about the Cause of Loss

In this type of fraud, the claimant misrepresents the cause of the damage to their property to receive insurance benefits. For instance, they might claim that their TV was damaged by a lightning strike when it actually stopped working due to a manufacturing defect.

Staging an Accident or Loss

This involves deliberately creating or staging an accident or loss event to receive insurance money. For example, a person might deliberately cause an accident or purposely damage their own property and then file a claim with their insurance company, falsely claiming that the damage was caused by a covered peril.

Buying Coverage After an Accident or Loss

This type of fraud occurs when an individual purchases the needed insurance coverage only after an accident or loss has occurred. They then submit a claim, falsely stating that the damage happened after the coverage was in place.

Misrepresenting Property Location or Usage

Individuals may lie about where their property is located or how it is used to obtain lower insurance rates. For example, they might claim that their vehicle is garaged in a rural area and only used for pleasure when, in reality, it is driven daily in the city for work or school.

Filing False or Inflated Claims

This involves submitting claims for damages or injuries that never occurred or were not related to the covered event. This could include submitting multiple claims for a single accident or including unrelated pre-existing damage in a claim.

It is important to be vigilant and report any suspected fraudulent activity to the relevant authorities. Insurance fraud hurts not only the insurance companies but also honest policyholders, as it leads to increased premiums for everyone. By being aware of these scams and taking steps to protect yourself, you can help reduce the impact of fraudulent property insurance claims.

Frequently asked questions