How to avoid car insurance scams

No one likes to think they’d fall for a car insurance scam. But with fraudulent drivers, agents, mechanics and insurance companies, there are a number of potential pitfalls that could crop up. With a little know-how about common scams and warning signs, you can avoid becoming the next target.

Common car insurance scams and how to avoid them

Most people want you to stay safe on the road, but some try to use car accidents to get insurance payouts instead. Or worse, some insurance companies resort to shady tactics to get your business and then not pay out your claims.

Watch for these 10 common insurance scams.

Staged accidents

• How it works. Drivers set up an accident either alone or with another person. Common staged accidents include rear-end collisions, parking lot accidents, left turn yield collisions or a friendly wave assuring that it’s safe to pull onto a street.
• Where it happens. Staged accidents are common in no-fault states like Michigan because your own insurance pays for damage regardless of fault, making it easy for scammers to get a quick settlement from their insurance.
• How to avoid it. Practice defensive driving, making sure for yourself that traffic conditions are safe. When you can’t avoid an accident, submit a detailed claim as soon as you can, and get an official report from the police at the accident scene or within a few days. Most companies also advise drivers not to admit fault on the scene.

Additional staged damage

• How it works. Drivers who stage an accident or take advantage of a real accident cause extra damage to their own cars.
• How to avoid it. Take pictures of both cars and write a detailed description of the damage as soon as you take car of any emergencies. Fill out an accident report right away to make sure you include clear details.

Must read: Can a police report help prevent car insurance scams?

Calling the police after a car accident could help you fight claim fraud. The police will verify that everyone is safe and document what happened. The police report can provide valuable details that affect your claim’s handling and payout, offering a neutral party at the scene.

Excessive mechanic repairs

• How it works. Shady mechanics perform unnecessary repairs or use imperfect replacement parts. You may need extra repairs shortly after, padding the repair shop’s pockets from customers and insurance companies.
• How to avoid it. Choose repair shops recommended by your insurance company, since these shops likely are verified for their work and reputation. When choosing an insurance-recommended repair shop, narrow down those with high customer ratings or recommendations by trusted friends and family.

Roadside service or tow trucks

• How it works. A tow truck or mechanic may approach you, claiming that you need your glass or bumper repaired. The service then charges you a higher price than normal or submits an excessive repair claim to your insurance. You also might get approached by a tow truck driver when you’re parked on the side of the road.
• How to avoid it. While using a tow truck or mechanic passing by may be convenient, avoid scams by calling for a service yourself. Avoid handing insurance information to strangers, especially when you weren’t involved in an accident.

False medical claims

• How it works. Scammers coordinate with medical practitioners who are in on the scam to make false or exaggerated medical claims. They may forge bills, charge for unneeded procedures or sue for extra pain and suffering.
• How to avoid it. It’s difficult to prevent this scam. Collect as much information as you can at the accident scene and work with your insurance company to provide proof if you have to defend your case.

Bait-and-switch insurance rates

• How it works. Some insurance companies offer low introductory rates or one-time discounts that expire when you renew your policy. The company may offset its low rate with low coverage, high deductibles or exclusions.
• How to avoid it. Compare multiple insurance companies and choose one that’s highly rated for customer service and claims. Read the policy before signing any documents, including fine print. Look for language like first month or introductory offer when comparing quotes.

Independent agent payment theft

• How it works. Most agents are trustworthy, but some will steal premiums for personal payment without setting up an actual policy. When you need to make a claim, you’ll find no insurance to back you up.
• How to avoid it. Don’t sign up for insurance from someone who calls you. Instead, call the agent’s office directly to avoid number spoofing. If you buy through an agent, verify your insurance with the company. Often, the company sends proof of insurance online or through the mail, so not receiving this proof may suggest agent theft.

Extra agent commission

• How it works. Some underhanded agents slip extra coverage on your policy without your knowing. This gives them a larger commission but could cost you hundreds extra per year for unneeded coverage.
• How to avoid it. Verify your policy and specific coverage purchased through the insurance company directly. Many companies offer online account management.

Getting sold more coverage than you need

• How it works. Some scammy companies or agents convince you to buy more car insurance than you need. This scam is subtle because it’s disguised as helpful car insurance coverage. A clear example is a company selling you roadside assistance despite your warranty including roadside service.
• How to avoid it. Stay cautious anytime you feel an insurance rep pushing for coverage you didn’t ask for. The salesperson should let you sleep on the decision, so walk away and consider your options. Also, be wary if the rep wants you to sign papers without checking them over.
• When extra coverage is required. Your lender might require you to buy collision, comprehensive or gap coverage when getting a car loan. However, you don’t need to buy insurance from the lender, which may come at a high cost and with extra exclusions. Instead, you can compare options yourself to find the best choice. Also, you’re never required to buy credit or payment protection insurance to get a loan.
• How to get your money back. If you’re sold coverage you didn’t want, you can try for a refund from the car insurance company. However, you may not get a full refund if you filed a claim. If the company won’t issue a refund and you feel you deserve it, you can file a complaint with the National Association of Insurance Commissioners (NAIC).

Extended car warranties

• How it works. Used car dealers and some insurance companies sell extended warranties that continue after a manufacturer warranty ends. It’s posed as a helpful product for less reliable or older cars. Whether you buy an extended warranty or not, expect multiple calls from warranty companies pushing you to extend your coverage.
• Why to consider avoiding it. Many drivers won’t use it since many repairs don’t cost more than the deductible, and some damage isn’t covered at all.
• How to avoid it. You can decline the warranty when buying your car or when getting a sales call. You can pay attention to a car’s reliability ratings, so you know what to expect for future repairs. Decline suspected spam telemarketers or robocalls, and report spam numbers if you pick up.

Must read: What about car loan scams?

You can face similar scams when buying a car or refinancing a car loan. The biggest underhanded tactic to look out for is a bait-and-switch scam, where you’ll be promised one rate or amount and end up paying a different price.

Signs of a car insurance scam

You could experience an insurance scam at any time, but a few subtle signs might warn you away:

• Lack of transparency. A shady agent or mechanic may avoid specific answers or forget to mention important information. They may dodge your questions if you ask for their business address or manager’s phone number.
• Asking for sensitive information. A scammer may approach you in person or by phone, asking for your policy number or identifying information. To be safe, call a company if you need help with a claim.
• Lack of documentation. The person may not give you official paperwork, receipts or proof of your policy or claim.
• Urgency or unusual requests. Requirements might seem strict, urgent or out of the ordinary, like paying in cash or hurrying through signing documents. They may have a limited time offer that expires when you hang up the phone, or say things like “I’m doing you a favor.”
• Reckless driving. A tough one to spot, drivers looking for an insurance payout may not drive safely on the road in general. Consider changing lanes, slowing down or taking a different route to avoid drivers who ride your bumper, swerve or change lanes quickly.
• High target driver. Scammers tend to hit people who can get them paid quickly without a fuss. They tend to target women, seniors and wealthy drivers. Stay alert for a scam if you might be a tempting mark for thieves.

Must read: Can a dashcam prevent auto insurance scams?

While not required for car insurance, a dash cam can prove your innocence by recording video of the situation from your dashboard. Benefits of a dashcam:

• Deterring staged accidents. Scammers don’t want their staged accidents or erratic behavior caught on camera.
• Proving the events of an accident. A video of an accident offers undeniable proof for what happened.
• Stopping the thief. If you fell for a scam and the scammer gets away, dashcam footage might help the police catch the scammer or give evidence.

Who is most likely to be researching car insurance scams?

Finder data suggests that men aged 35-44 are most likely to be researching this topic.

What to do if you fall for an insurance scam

Many people fall for car insurance scams, and those running the scam know how to sound legitimate or trap you in an accident. If you get scammed, you can take a few steps to soften the fallout.

1. Report the fraud. File a report with the National Insurance Crime Bureau (NICB) and the police so recurring issues get dealt with.
2. Contact your insurance. This lets your insurance company know to look deeper into any claims and prevent unnecessary payouts.
3. Contact other companies. You may need to freeze financial accounts or safeguard any personal information you accidentally gave out to prevent identity theft.
4. Change your passwords. Create new, unique passwords to prevent the scammer from accessing your accounts.

How to report a car insurance scam

The National Insurance Crime Bureau. You can give an anonymous tip or let the NICB contact you for more information. If you give your information, you may be named in court documents. Contact the NCIB by:

• Text “Fraud” to 847411 along with details about the fraud.
• Call 800-835-6422, Monday through Friday from 7 a.m. to 7 p.m. CT.
• Report fraud on the NICB website.

Insurer. To report a scam with your insurance company:

• Go to the company’s claims page or call your agent.
• On the claims page, look for information about reporting fraud.
• Use the phone number, email or online form given to explain the scam’s details.
• An insurance agent may contact you for more details or to let you know the outcome.

Local police. To inform your local law enforcement:

• Call the non-emergency line or visit your local precinct to report the scam.
• If you live in a major city, you may have access to online fraud reporting. Check on an official city or state website, or search online for the right web address.
• Write or tell the police as many important details about the scam as possible.
• Police may contact you for more details if looking for new leads, unless you file the tip anonymously.

What details should I include in the report?

When reporting auto insurance fraud, include as many details as you can about the person and situation, like:

• Physical description, including voice characteristics for phone scams
• Identifying information, like a name, address or insurance policy number
• Car description or license plate number
• Events of the accident or scam
• The reason you suspect fraud

How to find a legit insurer

Many companies and agents work with your best interest in mind. Signs that they’re keeping business above board:

• Stick to your needs. The representative should fulfill your needs, rather than offering options you’re not looking for. The person may even help you drop unneeded coverage or find savings.
• Direct answers. A standup insurance agent will give direct and detailed answers about pricing, policies, claims and contact info.
• Availability online. Look for the company’s online presence through a website, contact forms, email or social media. Beware of any company you can’t find listed online or that has unusual contact information, like a nonbusiness email account.
• Licensed company. Check that the company or agent is licensed by finding your state’s insurance regulator via the National Association of Insurance Commissioners website. Then, look for an online directory or call the regulator about the company you’re dealing with.
• Business ratings. Research the company’s business ratings with the BBB, financial strength with AM Best and customer reviews.
• Proof of insurance. Before applying, understand how the company sends proof of your policy. If by mail, you should receive it within 30 to 45 days after starting the policy. You may also get a copy through email or your online account.

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Bottom line

Insurance scams can happen to anyone at any time, and you may not be able to avoid the situation. However, you can keep your eye out for warning signs, such as unusual policy requirements or a stranger asking for sensitive information.

Rest assured that you can find legitimate insurance companies that actively fight against fraud.

Common questions about automobile insurance scams

• How common is car insurance fraud?

  According to the Insurance Information Institute, about 10% of the industry’s incurred losses and loss adjustment expenses are estimated to come from fraud. Between 2013 and 2017, property and casualty fraud totaled around $30 billion per year.

• How do states and insurance companies combat fraud?

  Most states have fraud bureaus that work to discover, investigate and bring cases of fraud to trial. Likewise, many insurers have gone the extra mile to set up special teams to investigate fraud. In 22 states, insurance companies are required to develop investigation processes to combat this problem.

• How effective are state fraud bureaus at deterring scams?

  Fraud bureaus have reported more tips from consumers and open cases that have resulted in more convictions than in previous years. In 2012 to 2013, the state of California received over 17,000 claims, resulting in saving the state from a potential $120 million in insurance losses.

• What's the Provide Insurance scam?

  Companies like Provide-Savings.com claim to be able to offer you multiple quotes for inputting your info in one form. However, after putting in your data, you won’t see any quotes, only a list of insurance companies you can click on to go to their websites.

  Your info won’t be used to start the quote process, and instead your info and contact details will be sold to an insurance carrier to contact you. It’s a common online quote scam, promising you’ll get quotes but never delivering.