Car insurance fraud, or “premium leakage,” comes in many forms and costs insurance companies an estimated $31.6 billion each year as of 2022.1 Here are six ways people commit fraudulent insurance activities via a car insurance company.
Rate evasion involves the misrepresentation of information on an insurance application in order to get a lower insurance rate for the same insurance coverage. Though many rate evasion cases involve intentional lies about mileage or omission of accident history, fraud also may involve unintentional errors during the application process. Regardless of the person’s intent, they’ll face consequences if they’re caught. Here’s a look at how much each category of misrepresented information represents of the total money lost each year:
|Amount lost in billions of dollars in 2016
|Percentage of total losses from fraud in 2016
|Accident and ticket history
Exaggerated or false insurance claims, like those surrounding nonexistent damages or bodily injuries, are fraudulent. Individuals target insurance companies by filing false claims to receive insurance payouts. For example, scheming with repair shops and medical professionals to file claims for property damage or injuries that do not exist are common ways to create false claims. Individuals also may damage their own property intentionally to file false claims, but car insurance does not cover intentional damage.
Those who stage accidents to create false claims aim to take advantage of their auto insurance policies, like personal injury protection plans. Often, people carry out staged accidents in populated and urban areas and affluent communities, where people are thought to have superior insurance.2 People execute staged accident scams in many ways, including intentional collisions with moving and parked vehicles.