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

This is a guest post from Kade Phillips. It's an interesting look at how bad apples in auto insurance can ruin it for the rest of us. You can also learn valuable tips to help you avoid being victimized by auto insurance fraudsters.

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.