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Car Insurance Fraud: Tips on How to Avoid Auto Insurance Fraud

car insurance fraud

Insuring your vehicle against damage and theft is an important part of your financial protection. But if you’re not careful, you can run into problems with car insurance fraud.

Looking at the latest statistics on fraud in America, it was revealed that auto insurance fraud ranks second among scams. This type of deception costs the country billions of dollars annually. Scammers see auto insurance fraud schemes as an opportunity to make money out of the ignorance of people.

Fortunately, there are quite a few organizations out there that are committed to preventing insurance fraud. After learning how insurance scams work, it will be difficult for a criminal to chase you down. So let’s find out what is car insurance fraud, and how can I prevent car insurance fraud?

Types of Vehicle Insurance Frauds

is car insurance a scam

Auto insurance fraud can affect anyone at any time. For example, when you decide to buy or sell your car. Here are a few car insurance fraud cases you need to know if you don’t want to fall for the scam.

Soft Insurance of Fraud

Deliberate exaggeration of damage after the accident. For example, let’s say you have an accident, and to get more money, you also indicate the dent on your car that appeared before the accident. Therefore, one may wonder: is car insurance a scam? Well, in such situations it is.

Hard Insurance Fraud

An insurance fraud like this is much easier to expose than the one described above. In this case, fraudsters initiate accidents, arson. Some even initiate theft of their cars to get as much money as possible. This is sometimes called insurance fraud car accident.

Car insurance fraud examples:

  1. Someone deliberately applies the brakes in front of you, so you end up hitting the car in front of you.
  2. You deliberately set your car on fire to receive insurance benefits.

General Auto Insurance Schemes and Auto Insurance Fraud Red Flags

car insurance call scams

Fraud Agent

From the moment you buy a car, scammers are already presenting you as their victim. A corrupt insurance agent can safely take your money for themselves without creating an insurance plan that you should get. But scammers have a great excuse – a delay in submitting an insurance plan. Accordingly, if you have an accident, then you must pay all costs.

Often the victims of this scam are students who have just bought their first car and are not well versed in car insurance. Fraudsters can also choose women or people with disabilities as their victims, as they believe that these people can avoid confrontation.


The best way to avoid being scammed by an agent is to check it thoroughly. When you sign the contract, you shouldn’t rush. Fraudsters can rush you so that you do not read the contract and simply sign it. You should not do it. Before signing a contract, try to study not only the company that insures your car but also the agent who helps you do it.

Car Repair Cheating

Most of those people who drive a car may not even be aware of what is inside the car. They entrust all the repair and selection of parts to mechanics. However, the mechanic can be a cheater. You will pay a lot of money to install substandard parts, which will lead to constant repair of your car.


Before taking your car to car service, try to study it. Read reviews on the Internet about this service. Find one of the best services on the internet, or browse the list of auto services your insurance company recommends for you. You can also ask your family or friends about good car service.

Deception with Staged Accidents

Fraudsters with staged accidents think through everything to every detail. They may hire fake witnesses to testify against you. They also turn to corrupt doctors and lawyers to help them win a case against an innocent person who was involved in a staged accident. With this preparation, you are unlikely to be able to prove your innocence.


If you are involved in a staged accident, spend more time gathering information. The more information you have, the more likely you are to win the case against the fraudster.

How to Protect Yourself from Car Insurance Fraud

car insurance fraud cases

Fortunately, you can protect yourself from fraud by taking some simple steps.

Drive carefully

When driving, keep a reasonable distance between yourself and other vehicles. This will help you avoid a fake accident.

Request an official invoice

If you have an accident, even if you turn the wing slightly, call the police and ask for an official report with the officer’s name. The official report prevents fraudsters from damaging their car after an accident and filing a larger lawsuit.

Take a lot of notes and photos

If possible, take photos of every damage on your car and photographs showing the angle of the accident. Try to photograph other people who have been involved in the accident.

Watch out for “helpful” passers-by

Beware of passers-by who quickly appear and try to convince you to contact a specific lawyer, doctor, or insurance agent.

Warn your insurance company

The most important thing is to report fraud. If you suspect that you are facing a scam, be sure to visit your insurance company. Report everything to your agent.

What to Do If You Are a Victim of a Scam and How to Report Car Insurance Fraud?

Car insurance scams can be quite frustrating. Your mobility and money may be affected if your vehicle is damaged or if you find out after an accident that your insurance policy is fake. Reporting auto insurance fraud to an insurance agent can help you get out of this unpleasant situation. Let your insurance company and the government insurance department know about your concerns. If you have sufficient evidence, they can initiate an investigation. It is very important to inform the representatives of the insurance company about your suspicions. They will be the ones to pay for your losses, so the sooner they figure out what went wrong, the sooner they start working on a solution.

Everything should be documented

Collect detailed records to corroborate your version of events. Set up a document box in your home to keep track of significant vehicle information. Keep the following documents in a safe place:

Your insurance policy

  • Payment details for premiums
  • Copies of estimates and accounts of mechanics
  • Notes and images were taken at the scene of the accident that involved your vehicle.
  • If possible, a copy of the accident report from the police officer.

Your records can affect your ability to engage in unethical or criminal activity, whether you are worried about an insurance agent, a mechanic, or an accident.

Notify the scammer

Other organizations like NAIC and NICB collect fraud reports. You may be able to file a claim against the fraudster depending on the damages you have incurred and your evidence of fraud. However, before filing a claim, check with a lawyer to determine if your chances of winning are worth the time and effort.

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Author of article

Caleb-Joshua Mashrooman

Interests: finance, legal advice, golf, economics

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