What is Auto Insurance Fraud and How Can You Prevent It?

Auto insurance fraud has now become a major concern for the insurance companies. This type of fraud is a serious crime and the offender, once caught, may have to spend years in jail. Auto Insurance fraud involves deceiving the insurance companies to cough up money as damages against an accident or car jacking when in fact the fraudulent party staged the accident. [more]However, auto insurance fraud not only costs billions of dollars/year to the auto insurance companies alone. The insurance companies charge high premium rates to the customers to mitigate the loss.

Auto insurance fraud is classified into two categories Hard and Soft Fraud. A hard fraud is the law enforcement term of illegally obtaining money from the insurance company by faking car accident, injury or theft; whereas a soft fraud is the deliberate suppression of minor information to gain money.

There are some prevalent practices in auto insurance fraud. The most common way to cheat insurance companies is by staging an accident. This deliberate staging takes many forms. The car owner, involved in the fraud, without waving or showing any signs steers his car before another speeding car and thus gets rammed. It may even turn out to be a driver, despite waving hand at a four way stop sign turns into the intersection and thus slams into another car. However, the most complex type of fraud involves more than one offender car. The driver of one car (better known in the law enforcing community as a squat positions his car before a victim’s car. His accomplice’s car known as a swoop suddenly cuts the squat vehicle across thus causing the squat to brake immediately. As a result, the victim’s car slams with the squat damaging it. This squat vehicle owner then files an insurance claim to the insurer and receives money.

The fraud can take another shape also. Often a car is intentionally damaged after the accident takes place. Besides, minor injuries are also portrayed as something very serious. Some people take help of unscrupulous mechanics, doctors to certify the damage done either to their cars or to them as serious. All these are ways to claim enough money from the insurance companies.

The New York State Insurance Department Established an Insurance Frauds Bureau (IFB) in 1981 to prevent all types of insurance frauds. If convicted of such crime an offender will have to face criminal prosecution as well as civil penalties.

However, everyone should join forces to combat the auto insurance fraud. Watch out for these clues that may help you from becoming a victim of this fraud.

1. Suspect immediately if after the accident (though not a fault of yours) the other driver at once admits his fault.
2. The other car without any reason suddenly comes before your car.It should warn you at once that the other driver may be about to commit the insurance fraud if the later seems all too well familiar with the insurance rules
3. Even in case of a very minor injury if the other driver or the passengers seated inside complain of major damage.

A possible auto insurance fraud should be reported immediately to the cops. However, the safest way to prevent being a victim and auto insurance fraud is to drive carefully and look out for the clues. If you think you are a victim of fraud you should contact local authorities or ask for help at CarSnaps .