Everyone knows car insurance fraud is bad news. But would you know how to spot it? We'll reveal 5 common schemes to give you a better understanding of fraud in action.
recap: insurance fraud 101
Car insurance fraud is any deception committed against an insurance company for financial gain. Fraud is illegal in all 50 states, and insurance companies (like ours) do all we can to investigate and expose fraudsters.
5 ways car insurance fraud can happen
1. Vehicle dumping, aka "owner give-up"
This type of car insurance fraud occurs when the owner disposes of the vehicle by leaving it somewhere, burning it, dumping it in a lake, or even selling it, and then claiming it was stolen.
In situations where the car was sold before being reported stolen, the fraud is intended to pay in 2 ways: through an insurance settlement to replace the stolen vehicle and through the sale of the original car.
2. False registration
Where you live affects what you pay for car insurance, and this car insurance scam is designed to mislead insurers and avoid higher premiums.
Drivers who partake in this scam often live in expensive parts of the country or in neighborhoods with higher theft rates, so they register their cars in other states or counties where insurance premiums can be lower.
3. Exaggerated repair costs after a car accident
This one is committed by less-than-upstanding repair shops. Let's say you bring your car to the shop after an accident, and the mechanics use shoddy parts to make the necessary repairs. By repairing your car with cheaper, possibly unsafe parts and billing your car insurance company for new parts they never used or work they never performed, they're committing fraud for financial gain.
Body shops can also commit exaggerated repair cost fraud by overcharging an insurer (and a customer) for necessary repairs. By purposely overstating the accident damages, the shop can make money after unneeded repairs.
4. Faulty airbag replacement
This is another type of car repair scam. It happens when mechanics don't replace the airbag after an accident. Instead, they stuff the compartment with other objects, such as beer cans (yup, you read that right) or packing peanuts to keep the sensors working.
Some states, like California, passed protective laws regarding airbag replacement. Replacing an airbag with a fraudulent one can be penalized by a year in prison and up to $5,000 in fines.
5. Faulty windshield replacement
Windshield fraud can take unsuspecting drivers by surprise. Usually, someone claiming to be a windshield repair specialist will approach you in a parking lot, trying to convince you that your windshield is damaged and you need a new one ASAP. But good news: you're in luck because this friendly expert just so happens to have your type of windshield on hand. And it gets better because this service will be completely covered by your insurance company. Yep, you won't even have to pay a dime. You better take advantage of this now, right?
Wrong. This is a scam that may drive up your car insurance rates and possibly put you in danger. These people aren't the real deal and will most likely replace your perfectly fine windshield with a shabby one. You might even lose your car insurance coverage if you fall for this type of scheme, especially if this "specialist" uses your insurance information to submit several windshield replacement claims under your name.
protect yourself with our E-star® Direct Repair Program
These repair scams may leave you wondering about a shop's trustworthiness. Our E-star program is designed to alleviate the worry. As an Esurance customer, you can choose from a sizable list of highly qualified body shops to repair your car after an accident. And if you go with an Esurance-approved repair facility, the repair is guaranteed for as long as you own the car.
Car insurance fraud is a serious and potentially dangerous criminal offense. If you suspect you've seen fraud, get in touch with your state's Department of Insurance. And let your insurer know if you suspect you're the victim of fraud.
Car insurance fraud 101
A quick intro to car insurance fraud.
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