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Types of Auto Insurance Fraud

Committing deception against and insurance company for the purpose of financial gain is known as insurance fraud. Currently auto insurance fraud is illegal in every state, and most insurance companies will work tirelessly to investigate these crimes and expose those who try to perpetrate the fraud. Here are the most common types of auto insurance fraud that currently rank at the top of the list.

1. Owner Give-Up or Vehicle Dumping

This is an increasingly popular form of auto insurance fraud because it is extremely easy to do. The basic premise here is the owner of the automobile will dispose of that vehicle by either leaving it unlocked somewhere, dumping it in a lake, selling it on the black market, or simply burning it. This person will then contact the insurance company and claim the vehicle was stolen. If the person sold it on the black market and then reported it stolen, they get paid through an insurance settlement and through the sale of that car. The insurance company fraud investigators have a vast experience in these types cases and can usually determine quite easily when something doesn't quite seem right.

2. The Faulty Airbag Scam

One of the more common types of auto insurance fraud involves faulty airbag replacement. The way this scam works is the auto shop gets word of an airbag recall and takes in jobs to replace those defective devices. Rather than replace the defective bags after removal, the mechanic simply places a damaged part back in the vehicle and sells the brand new one that should have been installed. This insurance fraud scam comes with a hefty penalty if the shop owner or mechanic is caught, resulting in a prison sentence of up to a year with a $5,000 fine per airbag.

auto insurance fraud


3. The Exaggerated Auto Repair

Repair shops can commit insurance fraud a number of different ways. One way they make a huge amount of money is by repairing a vehicle with used parts after it has been damaged in an accident. The mechanic will bill the insurance company for brand new parts, then install used or defective parts without the owner of the vehicle suspecting a thing. Another way these auto shops will scam the insurance company is by overcharging the customer for a repair after an accident. The work is never performed, the customer receives a bill and forwards to the insurance company for reimbursement.

4. The Faulty Windshield Scam

This insurance scam usually will take place in a parking lot when you least suspect it. Someone dressed as a repair technician and claiming to work for a windshield repair company approaches you and tells you they noticed a ding or crack in your windshield that posses your and your passengers serious risk. After their high pressure sales tactics, they assure you they not only have the exact replacement in their repair van, but they can make the repair on the spot and charge your insurance company so it will not cost you a penny. Once they convince you, they replace the glass with inferior material, and send the bill to your insurance company. To make matters worse, now that this technician has your name, they can file multiple claims until the insurer catches on. By then they are on to the next victim.

5. The False Registration Scam

Another very common form of insurance fraud is the false registration scam. The way this fraud works is very simple. The person who owns a vehicle will search out a city or town where the insurance rates are much lower. These areas could be where the crime rates are lower, or there are a significantly less amount of vehicles on the road. They will call their insurance company and then mislead them by registering the vehicle in that town. They continue to live in the area where the rates are more expensive, they simply benefit from borrowing an address where it will save them money in premiums each year.

The bottom line is if any act against the auto insurance company is to gain financially by deception, the penalty will be severe when caught. These insurance companies pay their investigators well to be able to spot these common types of auto insurance fraud and file charges against those committing the theft.