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Last updated: May 16, 2023

6 Types of Car Insurance Fraud to Look Out For

Learn about the most common forms of auto insurance fraud and how to avoid them.

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There is a chance that, at some point, you will encounter some form of car insurance fraud. Some types of fraud are easier to catch than others, and you may be surprised to learn that auto insurance companies lose billions of dollars due to fraudulent activities annually. In turn, these losses drive up insurance premiums.

We’ve compiled essential information about six common forms of car insurance fraud. Read about these types of fraud so you can avoid becoming a victim.

6 Common Types of Car Insurance Fraud

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

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:

Misrepresented information Amount lost in billions of dollars in 2016 Percentage of total losses from fraud in 2016
Primary drivers 10.3 36%
Vehicle mileage 5.4 19%
Other 4.1 14%
Accident and ticket history 3.4 12%
Garaging 2.9 10%
Identify exceptions 2.8 10%

False Claims

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.

Staged Accident

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.


Within staged accidents, there are often many parties involved in the schemes, including fake witnesses, insurance agents, and surrounding companies.

Multiple Claims

Another form of auto insurance fraud involves filing claims with multiple insurance providers for a single accident. People may be tempted to file multiple claims to receive multiple insurance payouts for the same damage. However, this is considered “double dipping” and can result in fines or jail time.

False Reports of Stolen Vehicles

Auto theft fraud refers to events involving the false reporting of a vehicle as stolen. In 2022, auto insurance companies lost nearly $7.4 billion from auto theft fraud.3 Planned vehicle theft typically involves filing claims with auto insurers after someone intentionally abandons their car or plans for someone to “steal” their car and disassemble it for parts.

Employee Scams

Many auto insurance fraud cases involve scams by employees, including repair shop mechanics and insurance agents.

  • Fraudulent agents and brokers: Unfortunately, many auto insurance fraud cases involve dishonest agents and brokers who deceive policyholders. Some illegitimate or unethical insurance agents and brokers may collect customers’ policy premiums without sending money to insurance companies, which is known as premium diversion. Other individuals pose as ghost brokers and sell fake or nonexistent policies to unsuspecting customers.
  • Untrustworthy repair facilities: Repair shop scams involve using parts from salvage vehicles to fix your car. Common examples of salvage fraud include the installation of previously deployed airbags and faulty glass and windshield replacements.


Premium diversion by fraudulent or unlicensed insurance agents is the most common type of insurance fraud.4

What Is Car Insurance Fraud?

Car insurance fraud refers to situations that involve the deception of policyholders, insurance companies, or other parties for financial gain. Typically, policyholders who engage in fraud aim to receive payouts or better rates from their insurers by lying, omitting information, or filing false claims. Fraudulent agents, brokers, and repair shops can commit fraud by selling fraudulent policies, engaging in premium diversion, repairing vehicle damage with salvage parts, and contributing to false claim reports.

There are two distinct categories of fraud: soft fraud and hard fraud.

Soft Fraud

Soft fraud is the more common form of auto insurance fraud and is associated with less-severe consequences, like fines and legal fees. Examples include exaggerating a legitimate claim or lying during the application process to get a lower rate. For example, claiming your vehicle is worth more than your insurance company’s cash value of your car is a form of soft fraud. Agent and broker scams are also forms of soft fraud.

Hard Fraud

Hard fraud is less common and leads to more severe punishment, including jail time. Hard fraud examples include planning or inventing a loss for claim payout (e.g., staged auto accidents or theft).


Our goal is to familiarize you with the various types of auto insurance fraud so you can learn how to spot possible scams. However, it’s also important to be familiar with other forms of fraud that are prevalent throughout the auto industry. For more information, review our pages on auto warranty scams and auto loan refinancing scams.

Frequently Asked Questions

What are the consequences of car insurance fraud?

The consequences of car insurance fraud vary by situation and depend on your state of residence. Specifically, cases of hard fraud, like staged accidents, are subject to more severe punishments, like prison time. Cases of soft fraud, like the exaggeration of claims or events, are often misdemeanors and result in fines or legal fees.

How common are false auto insurance claims?

According to the 2022 Insurance Fraud Report from fraud, risk and compliance company FRISS, false auto insurance claims account for 10 percent of all claims filed, making false claims one of the most common forms of auto insurance fraud.

How can I report car insurance fraud?

  1. Call the National Insurance Crime Bureau (NICB) at 800-835-6422 between 7 a.m. and 7 p.m. Central time, Monday through Friday.
  2. Or, you can fill out the online form through the NICB website:
  3. Because each state provides its own resources and processes for reporting fraud, you may find it helpful to contact your local FBI office instead. Find your nearest office using the FBI’s website:

How can I avoid committing auto insurance fraud?

  1. Be honest on your application and claim reports.
  2. Understand what is illegal when it comes to filing claims and submitting your initial application.


  1. Insurance Fraud Costs the U.S. $308.6 Billion Annually. Coalition Against Insurance Fraud. (2022).

  2. Staged Auto Accident Fraud. National Insurance Crime Bureau. (2023).

  3. INSURANCE FRAUD. National Association of Insurance Commissioners. (2022, Dec 19).

  4. Insurance Fraud. Federal Bureau of Investigation. (2023).