Battling Auto Insurance Fraud: Strategies For Success

Auto insurance fraud is a costly issue, with the Coalition Against Insurance Fraud estimating that fraudulent claims cost American consumers over $80 billion a year. This issue is not limited to the roadways, with fraud occurring across multiple sectors, including auto, medical, and homeowners insurance. The cost of fraud is often passed on to the consumer, with the FBI estimating that insurance fraud costs policyholders an extra $400 to $700 a year in premiums. This means that fighting auto insurance fraud is crucial to keeping insurance premiums low. Auto insurance fraud can take many forms, from giving false information on an application to inflating claims or even staging accidents. To fight auto insurance fraud, it is important to be vigilant and informed, both when purchasing insurance and when driving. Being aware of common scams, such as accident scams, insurer tricks, and referral fraud, can help individuals protect themselves. Additionally, working with trusted and licensed agents and companies, as well as keeping accurate records and being cautious when providing personal information, can also help in the fight against auto insurance fraud.

Be cautious of low insurance prices

While it's important to be mindful of the cost of insurance, it's also crucial to be cautious of unusually low insurance prices. Here are some reasons why you should be wary of insurance prices that seem too good to be true:

• Fraudulent Agents: Unethical or dishonest insurance agents may offer extremely low prices to attract customers, but this could be a scam known as "sliding". In this practice, the agent adds extra coverage that you didn't request into your policy, increasing your premiums and boosting their commission.
• Limited Coverage: Extremely low insurance prices may indicate insufficient coverage. It's important to carefully review the policy to ensure it provides adequate protection.
• Financial Stability: Opting for the cheapest insurance option may lead to issues with financial stability. It's important to select a financially stable company that can honour your claims. You can check the financial health of insurance companies through rating agencies like AM Best and Standard & Poor's.
• Quality of Service: A lower price may be indicative of a lower quality of service. It's crucial to choose an insurer that offers fair prices and delivers quality service, especially when you need assistance with filing a claim.
• Hidden Costs: Some insurance companies may advertise low prices but include various hidden costs, additional fees, or exclusions in the fine print. Make sure to read the policy carefully to understand all the charges and ensure there are no surprises later.

Remember, insurance is meant to provide financial protection and peace of mind. While cost is an important factor, it shouldn't be the sole criterion for choosing an insurer. Conduct thorough research, compare multiple options, and prioritize finding a reputable company that offers fair prices and reliable coverage.

Verify the legitimacy of your agent and insurance company

Verifying the legitimacy of your insurance agent and company is crucial to protect yourself from fraud and scams and ensure your coverage is valid and reliable. Here are some detailed steps to help you verify the legitimacy of your agent and insurance company:

Verify the State License of the Agent

Ask the insurance agent for their license number, known as the National Producer Number (NPN). A legitimate agent should be comfortable providing this information. You can then input this number into the National Insurance Producer Registry (NIPR) to verify their license. Alternatively, you can use your state's Department of Insurance (DOI) website to search for the agent by name or license number. Each state has its own insurance licensing requirements, and a valid license confirms that the agent is authorized to sell insurance in your state.

Review the Insurance Company's Financial Strength Ratings

It is important to assess the financial stability of the insurance company by reviewing ratings from independent agencies. A.M. Best, for example, is an independent ratings company that evaluates providers' financial ability to meet insurance obligations. Checking these ratings will give you confidence that the company can meet its financial obligations and pay out claims.

Research the Insurance Company

Due diligence is essential when it comes to choosing an insurance company. Start by reviewing their official website. A legitimate and professional company will have a well-designed, user-friendly website with clear and transparent information about their history, mission, values, and the policies they offer. Be cautious if they ask for excessive personal information, such as your bank account number. Contact the company with any questions you have about their policies and services.

Verify the Company's Licensing and Authorization

Contact your state's insurance department or regulatory agency to confirm if the company is licensed and authorized to sell insurance in your state. They can provide information about the company's licensing status and any complaints that have been filed against them. This step will help ensure that the company is legitimate and authorized to operate in your state.

Be Wary of Red Flags

Be cautious of companies or agents exhibiting red flags, such as unlicensed operation, poor financial ratings, complaints and legal actions, unrealistically low premiums, lack of transparency, or pressure tactics. Always trust your instincts and be cautious if something seems too good to be true.

By following these steps, you can help protect yourself from insurance fraud and ensure that you are dealing with a legitimate and reputable insurance company and agent.

Be aware of common accident scams

Staged accidents are a common type of auto insurance scam. Criminals often target new, rental, or commercial vehicles because they tend to be well-insured. They also prey on women driving alone and senior citizens as they are perceived to be less confrontational.

• Swoop and squat: Two vehicles trap a victim and force them into a rear-end collision. The "squat" vehicle pulls in front of the victim, and the "swoop" vehicle cuts off the squat vehicle, causing a collision. The swoop vehicle then speeds away, leaving the victim to be blamed for the accident.
• Drive down: The victim is tricked into turning early by an oncoming driver who waves them through, only to block their path and cause a collision.
• Wave down: Two vehicles set up a crash by waving to the victim that it is safe to pull out of a parking lot or side street when it is not.
• Enhanced damages: After a legitimate accident, the driver who is not at fault causes additional damage to their vehicle to increase the cost of the claim.
• Panic stop: A vehicle strategically brakes in front of the victim, causing them to rear-end them.
• Sideswipe: A driver maneuvers to sideswipe another vehicle in the inner left-turn lane of a dual left-turn lane intersection.

To avoid becoming a victim of a staged accident:

• Keep a safe distance from other vehicles, especially when driving in urban areas or wealthier communities.
• Be cautious when someone waves you through an intersection or parking lot, as they may be setting you up for a collision.
• Document the accident scene, including damage to vehicles, the number of passengers, and other details such as license plate numbers and witness information.
• Be wary of unsolicited advice or services from individuals who appear at the accident scene, such as tow truck drivers, doctors, or lawyers.

Document all incidents and details

Documenting all incidents and details is a crucial step in fighting auto insurance fraud. Here are some measures you can take to ensure comprehensive documentation:

• Keep an accident kit in your vehicle: Having an accident kit readily available in your car can make a significant difference. This kit should include items such as a disposable camera or camera phone to capture images of the accident scene, including vehicle damage and the number of passengers in other vehicles. Alternatively, you can use your phone to take detailed photos and videos of the accident site.
• Exchange information with the other driver: After a collision, it is essential to exchange information with the other driver. Obtain their driver's license, vehicle registration, and proof of insurance. Take pictures of the damage to both vehicles from multiple angles. Additionally, count the number of people in the other car and collect their names, addresses, and contact information.
• Call the police and obtain a police report: Even if the accident seems minor, it is important to involve the police. Request a police report with the officer's name, as this makes it more challenging for criminals to intentionally cause further damage to the vehicles later and attempt to claim a larger insurance payout.
• Record crucial details of the accident: Ensure you document the specifics of the accident, including names, addresses, license plate numbers, driver's license numbers, and contact information for witnesses. Take note of any other relevant information that may be important for insurance purposes or potential legal proceedings.
• Be cautious of unexpected bystanders: Avoid individuals who suddenly appear at the accident scene and try to direct you to specific doctors, attorneys, or repair facilities. Fraudulent schemes often involve individuals posing as helpful bystanders to direct victims towards dishonest service providers.
• Demand detailed bills and keep all receipts: For any repairs or medical services required following the accident, insist on receiving itemized bills and keep all the receipts. This documentation will be essential when dealing with insurance companies and ensuring you are not overcharged or scammed.
• Verify the authenticity of your repair shop: When choosing a repair shop, be cautious of facilities that use cheap or counterfeit parts. Insist on using Original Equipment Manufacturer (OEM) parts to ensure the quality and safety of the repairs.
• Be vigilant about personal information: Guard your insurance identification number, just as you would your social security number. Criminals can use this information for fraudulent activities. Additionally, be cautious about sharing your insurance information with anyone other than your insurance company or law enforcement.

By diligently documenting all aspects of an accident, you can help protect yourself from auto insurance fraud and ensure a smoother claims process.

Report suspected fraud

If you suspect auto insurance fraud, it is important to report it. Here are some steps you can take:

• Contact your state's fraud bureau, if available.
• Reach out to your insurance company to see if they have a system in place to report fraud.
• Visit the National Insurance Crime Bureau (NICB) website and click the "Report Fraud" button to anonymously report the crime.
• Report it to your local FBI branch.
• Contact the Coalition Against Insurance Fraud (CAIF), a non-profit alliance of consumers, insurers, and government agencies that uncovers criminals who prey on insurers. CAIF offers resources, including contact information for state and federal insurance and law enforcement agencies.
• If you are in Texas, you can report fraud online or by calling the TDI Fraud Unit's Help Line at 800-252-3439. You can also report fraud involving Medicare, Medicaid, or drug or health care discount programs to the Texas Attorney General's Consumer Protection Hotline at 800-621-0508.

Additionally, if you need immediate assistance, such as in the case of a staged accident, call the local or state police.

Frequently asked questions