What is car insurance fraud?
Key takeaways
Car insurance fraud involves deceptive practices that often cost the industry billions and generally lead to higher premiums for customers
It includes deceptive acts like exaggerating claims and staging accidents, as well as ghost broking, where scammers sell invalid or fake insurance policies
Penalties for car insurance fraud can range from fines to imprisonment as well as difficulty obtaining insurance in the future
What is car insurance fraud?
Car insurance fraud is when individuals or groups act deceptively against insurers to make unlawful financial gains. It can range from exaggerating damage when making a claim to staging accidents or even selling fake insurance policies.
Insurance fraud impacts insurers significantly, leading to billions in industry losses - and often results in increased premiums as insurers try to offset these losses. It can also lead to increased scrutiny on the insurers’ part, as well as higher administrative costs.
What are the types of car insurance fraud?
Car insurance fraud can take many forms, so being aware of them will help you recognise potentially suspicious circumstances in real life - helping you remain alert and avoid difficult situations.
Fronting: Fronting is when an older and more experienced driver names himself as the main driver on a policy with a younger driver in order to get lower premiums, but the younger person does most of the driving. This is illegal and a type of insurance fraud that can lead to a fine or even a criminal record
Imaginary passengers: When you make a claim for a passenger that doesn’t exist to get an extra or additional payout for an accident
Staged accidents: When you and another driver both conspire to stage an accident with each other or cause an actual accident with an innocent third party
Application fraud: When you give false information or withhold information on an insurance application to get reduced premiums - this will likely result in rejected claims and voided cover
Pre-inception fraud: When you take out a policy and try to claim for something that occurred before you took out cover
Vehicle dumping: When you dispose of a vehicle, whether it be by selling or destroying it, then pretend it’s stolen and claim for theft
Exaggerated claims: When you make a fake or exaggerated claim about damage during a crash or injuries such as whiplash
Ghost broking: When fraudsters sell a fake insurance policy by posing as an insurance broker or company
What are car insurance scams?
Unfortunately, the motoring world is also rife with car insurance scams, where fraudsters will involve third parties like innocent motorists in criminal activities. These are often designed to confuse and pressure car owners into making hasty decisions.
To protect yourself, document everything at the accident scene - take photos, collect witness statements, and report directly to your insurance provider. Avoid settling claims at the scene without proper documentation and legal advice.
Examples of scams
Some common examples of car insurance scams include:
Staged or deliberate accidents: Sometimes known as crash-for-cash, someone will try to intentionally cause a crash so they claim on a car insurance policy. It can also be known as flash-for-cash, where someone will flash their lights to let a driver go where they normally wouldn’t have to, then crash into them intentionally. Another instance is slam-on fraud, where someone will brake unexpectedly so the driver behind will crash into them
Ghost broking: Ghost broking is when someone poses as an insurance broker or provider and sells you a cheap insurance policy, often with terms that might seem too good to be true. You pay for the fake policy and remain without valid insurance
Compensation scams: A compensation scam is when someone will cold call you and say you can claim compensation for an accident you were in. They’ll often pretend to be involved with official organisations to get your details and persuade you to pay for false services
Ad spoofing: Similar to compensation scams, these fraudsters target people involved in accidents and pose as insurers to lure them to a fake website that can contain malware or spyware
What are the penalties for committing car insurance fraud?
Committing car insurance fraud or insurance fraud of any kind can lead to severe penalties, fines, points on your license or possibly even a criminal record. Your insurance policy will be voided and your claim will be rejected, while finding insurance in the future will be more difficult and definitely more expensive.