Guest Post: Examples Of Car Insurance Fraud That Can Raise Your Rates

Auto insurance fraud has existed from the moment auto insurance was first offered to consumers. There will always be those who are willing to use unsavory methods to enjoy monetary gain. Unfortunately, the fraudulent methods they use cost law-abiding policyholders millions of dollars each year in increased premiums. If you have ever been victimized by car insurance fraud, there's a good chance your rates have climbed as a result. The first step toward protecting yourself is recognizing where you may be exposed, and staying vigilant. 

Below, we'll introduce you to a few examples of insurance fraud that can raise your rates, and leave you vulnerable to suffering a financial loss. We'll also offer a few tips you can implement immediately to protect yourself. 

The Planned Auto "Accident" 

Imagine this scenario: you're driving at normal speed with very little traffic on the road ahead of you. Suddenly, a vehicle in an adjacent lane moves directly in front of your car and slams on their brakes. You react by engaging your car's brakes. Unfortunately, there's too little time to avoid a collision, and your car slams into the rear end of the braking vehicle. 

This scenario occurs every day. The "accident" is staged. It is orchestrated. The reason? The perpetrator knows your insurer will likely consider you to be at fault for the "accident" since it was a rear-end collision. He or she will file a false claim, which may be paid without investigation. Because you are deemed to be at fault, your rates will rise. If you are already considered a high-risk policyholder, your policy may be canceled. 

Owner-Directed Auto "Theft" 

This form of insurance fraud is perpetuated by a vehicle's owner. While the individual schemes vary, the basis premise is the same: report the car stolen and collect the insurance benefit. Here are two scenarios that are common: 

Scenario #1: Your vehicle needs expensive repairs. For example, the engine may be on the verge of failure; the transmission might be behaving strangely; the suspension may be about to give out. Rather than paying for the necessary repairs, you hide the car and report it stolen. Once your auto insurer sends you a check, your car mysteriously reappears by the side of the road abandoned. 

Scenario #2: You purchase a new vehicle and insure it. You then make arrangements to have it shipped overseas - either anonymously or through an alias. Once your vehicle arrives in a foreign port, it disappears into the black market. You file a fraudulent claim with your insurer while splitting the cash generated from the black market sale. 

Both of the above scenarios happen less frequently today than in years past. This is due to a growing effort on the part of car insurance companies and law enforcement agencies to stop both practices. But it continues to happen. And it raises rates for every consumer since the costs associated with the fraud are absorbed by all policyholders. 

How To Protect Yourself From Car Insurance Fraud 

The most important thing you can do to avoid being victimized by an auto insurance scam is to remain wary. For example, when you're on the road, pay attention to your surroundings, including vehicles in front of you that may be forcing you to ride too closely. Staged accidents are more common than many consumers realize. 

Also, if you are involved in a collision, take copious notes of the event. Request the names of each person in the other vehicle, and their respective contact information. Ask for a driver's license number and vehicle registration data. Then, contact the police to file an accident report. It's also worthwhile to keep a camera in your car to document any damage that results from the collision. 

Car insurance fraud is common because it is so profitable to the criminals who initiate it. Realize their profit comes at your expense through higher rates and a tarnished driving record. The best way to protect yourself is to stay vigilant and report any fraudulent activity, including staged accidents, to the police. 

Kade Phillips is a professional insurance writer, contributing content to Kanetix auto insurance marketplace, which compares rates and offers quotes.