What Is Car Insurance Fraud?

By Carole Vansickle

  • Overview

    Car insurance fraud, also known as auto insurance fraud, occurs when one party deliberately causes an accident or injury using a motor vehicle in order to benefit from another party's car insurance. This type of fraud is extremely common, fairly easy to perpetrate and nearly impossible to prove or prosecute. However, by being familiar with types of car insurance fraud and the situations that lead to it, you can avoid this type of problem in your own life and with your own car insurance.
  • Function

    Car insurance fraud is a method of getting money via insurance claims on other people's insurance. It relies on creating situations that are not life-threatening but can cause damage to a vehicle or potentially allow the person perpetrating the fraud to claim physical injury like whiplash. Any damage of this type can enable the perpetrator to get money from your insurance policy without having to work for it. In some cases, even if your insurance company does not end up paying out, your premiums can still rise because you were involved in an accident that led to an injury claim.
  • Significance

    Car insurance fraud has several implications. The biggest problem is, of course, that your insurance premiums usually will rise following a big payout for an accident. Also, this type of fraud is just plain dishonest and the perpetrator is stealing from you and your car insurance company. Furthermore, car insurance fraud can be repeated over and over again in similar locations and even on the same person, once they are identified as having a lax insurance company that is easy to fool and pays out relatively quickly. Worst of all, car insurance fraud places you and your family in danger by the deliberate creation of motor vehicle accidents.


  • Types

    Car insurance fraud relies on the creation of accidents that will damage vehicles but not cause any major damage to the people inside them. In a "swoop and squat," two vehicles box in a third vehicle, driven by the victim. The vehicle behind the victim edges up close behind the target car to try and force it to speed up. Then, the vehicle in front of the target car stops suddenly, causing the target to ram into the front vehicle. The back car then leaves the scene, and the target car's driver is left holding the bag in a rear-end collision. Another type of fraud is called the "panic stop." A full, late-model vehicle drives in front of a target. Someone in the front vehicle watches for a distraction like the target answering the phone or reaching for something in the next seat. As soon as this occurs, the scammers slam on the breaks. Again, the target usually does not have time to react and is liable for all of the reported "injuries" in the car as well as damage to a new or nearly new car. Finally, some people try to perpetrate car insurance fraud when they have been in a legitimate accident but escaped injury. They may find a doctor who is willing to diagnose whiplash or other hard-to-verify injuries and then just pile up the list. This is stealing from their own insurance company and will eventually raise their premiums or the premiums of whoever owns the policy, but they can always switch policies before the accident actually goes on record.
    Created accidents are not designed to kill or seriously injure people, but they can.
  • Identification

    If you suspect that you have been the target of car insurance fraud, then there are several things that you can do to determine if it did happen. If you had a crash as a result of someone else indicating to you that it was safe for you to merge, for example, then you may be able to convince your insurance company not to raise your premium and they may be able to fight the payout. In a similar manner, if you believe that the person in front of you stopped without reason, you must bring this to your insurance company's attention. Unfortunately, since even created accidents can seldom be caused without violation of some traffic laws on everyone's part, you will likely still be held responsible.
  • Misconceptions

    Many people think that they should make every effort to get as much out of the insurance company whenever possible. However, insurance rates rise when insurance companies have to compensate for false or partially false claims. As a result, you are eventually causing your own premiums to climb when you fabricate or exaggerate injuries. Certainly claim everything that you deserve, but do not exaggerate your claims.
  • Prevention/Solution

    In the end, the only way to avoid being the victim of car insurance fraud is to always avoid violating traffic laws and legislation. Accidents do not happen when distance laws and speed limits are obeyed because cars are then far enough apart and can stop even at the last minute without skidding into the next car. Also, avoid talking on the cell phone while driving and always keep your eyes on the road. If you find that you have still been the victim of car insurance fraud, then work with your insurance company to fight the false claims and to keep your premiums as low as possible. A responsible driver history will help you a great deal.
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