Auto Insurance Fraud: Hard Truths And Real Dangers

Hard auto insurance fraud is a type of insurance fraud that involves intentional damage or destruction of property with the intention of collecting on the insurance policy. It is a major league crime that involves a wide variety of schemes, such as staging accidents, car fires, and counterfeit airbags. These scams not only cost insurance companies billions of dollars each year but also put innocent drivers and passengers at risk. Staged collisions, for example, are a common type of hard fraud where scammers work in pairs to trap unsuspecting drivers into rear-ending them. Hard fraud is a serious offence that can result in several years of prison time, depending on the state and the amount of money involved.

Staging collisions

One of the most common types of staged collisions is the "swoop and squat", where scammers pull in front of an innocent driver and then slam on their brakes, resulting in a rear-end collision. Another variation is the "drive down", where a fraudster tricks a driver into turning by waving them on and then crashing into them. A third type is the "wave down", where scammers wave to a victim, indicating it is safe to pull out of a parking lot or side street, only to then crash into them.

These scams can have dangerous consequences, with innocent drivers being put in very dangerous positions and, in some cases, suffering severe injuries or even death. To protect themselves, drivers should be vigilant, document accidents, and contact the police if they suspect fraud.

Staging car fires

• Swoop and squat: Two vehicles trap a victim and force them into a rear-end collision. The swoop vehicle races off, leaving the victim to take the blame for the accident.
• Drive down: While waiting to make a left turn, the victim is tricked into turning early by an oncoming driver who waves them through. The oncoming driver then blocks the victim's entrance to the parking lot, and another vehicle collides with the victim's car. The blocking vehicle leaves the scene, making it appear as though the victim is at fault.
• 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, even though their vision is obscured.
• 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 to prompt the trailing car to rear-end them.
• Sideswipe: A driver manoeuvres 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 car fire, it is important to be vigilant and document the extent of damage, the number of passengers involved, and any other relevant details. Additionally, be wary of individuals offering unsolicited advice, medical or legal services, or towing services.

Exaggerating injuries

It is important to note that you can be liable for fraudulently filing an injury-related insurance claim even if you do not lie or make false representations. For instance, if you fail to disclose information that you have a legal duty to disclose, you may be liable for filing a fraudulent personal injury claim.

The consequences of filing a fraudulent personal injury claim can be severe. Not only can the insurer deny your claim, but you could also be liable to the company for any money paid out to you, for the costs of the insurance company's investigation of the claim, and even for punitive damages in some cases. You could even face criminal charges.

To avoid committing soft insurance fraud, it is important to be completely honest and transparent when applying for auto insurance or filing a claim. Report events exactly as they happened and include all relevant information. As long as you do not knowingly withhold information or include false information, you likely have nothing to worry about.

Faking a stolen car

To fake a stolen car, an individual may report their vehicle as stolen to an insurance company and law enforcement when it has not actually been stolen. This is done with the intention of receiving compensation for its purported loss. This type of fraud can have serious consequences, including jail time and significant fines.

• Owner Give-Ups: The vehicle owner lies about the theft of their vehicle and then orchestrates its destruction to collect insurance money. For example, they may claim that their vehicle was stolen, but it is later found burned or heavily damaged in a secluded area, submerged in a lake, or buried underground.
• 30-Day Specials: Owners whose vehicles need extensive repairs often report the vehicle stolen and hide it for 30 days—just long enough for the insurance company to settle the claim. Once the claim is paid, the vehicle is typically found abandoned.
• Export Fraud: After taking out a bank loan for a new vehicle and obtaining an insurance policy, the owner reports the vehicle stolen to law enforcement. However, instead of it being stolen, the owner has illegally shipped the vehicle overseas to be sold on the black market. The owner then collects on the insurance policy and any illegal profits made from the sale.
• Phantom Vehicles: In this scheme, an individual creates a phony title or registration for a non-existent vehicle to secure insurance. They then report the vehicle stolen before filing a fraudulent insurance claim. Antique or luxury vehicles are often used for this scheme to obtain larger insurance settlements.

It's important to note that car theft fraud is a felony in almost all jurisdictions due to the emotional and economic distress it causes. Insurance fraud, in general, inflicts extra costs on insurance companies and financially impacts consumers and businesses. Therefore, it is crucial to be aware of the signs of fraud and report any suspected fraudulent activity to the appropriate authorities.

Inflating damages

The danger of soft fraud is that it can be done accidentally. It is important to be completely accurate when filing a car insurance claim. Make sure you are only listing damages caused by the accident in question. If you don't, your claim could be denied and your rates increased.

Insurance fraud costs the average U.S. family between $400 and $700 per year in additional premiums. It is a "major league crime" that can take many forms, from misrepresenting personal details on insurance applications to strategically planned schemes like staged accidents.

Frequently asked questions