Auto Insurance Fraud - How It Works

Examples of 'soft' fraud include filing claims for injuries not related to the car accident, filing more than one claim for the same injury, misreporting loss of earnings due to injuries or inflating car-repair costs. 'Hard' fraud includes filing claims when the claimant was not actually involved in the accident at ll, staging collisions, submitting claims for medical treatment that didn't happen or making up injuries. 'Hard' fraud can also occur when cars are falsely reported as being stolen.

Another trick is registering a car to an area which attracts a cheaper insurance premium other than where the policy-holder actually lives i.e. you live in a rough neighbourhood so you register the car as being kept in a safer one. Another common example involves registering a substitute primary driver instead of the real one. The substitute might be a parent or other relative who is a lower insurance risk and thus attracts a lower premium, than the 18 year old who's keen to get on the road without payng 2K a year to do it!

Fraudulent claims can be claims which have a base in legtimacy but are exaggerated or they can be false claims in which the accident claimed never actually happened. Once an exaggerated claim has been identified, by comptuerised 'red flags' or by suspicious claim handlers, insurers try to negotiate the claim down. Some red flags are: an increase in coverage shortly before a claim, a claimant who's in financial distress already, a history of claims or a claimant who's unusually clam after a loss, lack of police reports and handwritten receipts for car repairs.

The most common type of auto insurance fraud in the UK in recent years was non-disclosure of claims or convictions. The more claims or convictions you have the higher your premiums so there is a financial incentive to be 'economical with the truth'. The down side to this is that you may then not get a payout you're entitled to if you actually need one, if the insurer spots that there is not full disclosure on your application form.