Auto insurance companies have a big battle on their hands when it comes to fraud. There are so many ways people use to try and put one over on car insurance companies that a whole industry has been created to combat it. Fraud takes many forms and effects everyone. Because of fraud everyone pays more for car insurance. Therefore, the auto insurance industry is usually very aggressive when it comes to pursuing fraudsters. Know this: if you commit insurance fraud, you will likely be caught and suffer some severe consequences.
What is Car Insurance Fraud?
Any deception you commit against an auto insurance company that results in your financial gain can be considered fraud. This is why you should be very careful and honest with your answers on a car insurance application. Deceiving the insurance company about, let’s say, the address where your car is parked, can be considered fraud if it means you are paying a lower rate while really keeping your car at another address. Even if your answer is a mistake, you could still be held liable.
Other types of fraud are more deliberate and elaborate.
Types of Car Insurance Fraud
The seemingly unharmful type of fraud, like giving an incorrect garaging address, is known as soft fraud. On the opposite side is hard fraud. Hard fraud is much more elaborate, and the consequences are more severe if caught.
As mentioned, soft fraud occurs when you lie on an auto insurance application in order to lower your premium amount. It can also occur when a claim is exaggerated in order to recoup more money than you would otherwise receive from the claim.
Soft fraud is more common than hard fraud. While lying about a vehicle’s location is one of the more common types of soft fraud, others include:
- Not informing your insurance company about all the drivers in your household
- Exaggerating damage or loss of property on a claim
Hard fraud refers to a situation where a loss is invented or planned in order to collect the payout. Hard fraud is a very serious crime that usually includes jail time. Vehicle theft rings that target vehicles and then collect on the insurance claim are one example of hard fraud. Others include, staged auto accidents or collusion to damage or destroy a vehicle to collect the insurance money.
Insurance fraud costs everyone money. The more fraud, the more everyone pays in auto insurance rates.
To keep your rates low, be sure to do your own insurance audit every year. Start by shopping around to compare rates. InsuranceWins can help. Just provide some basic information and we’ll send you quotes from major carriers so you can compare rates. Don’t overpay! Shopping around will save you money.