Reader question:

Is the reason that car insurance rates are so high because of car insurance fraud? Is there some way that I can protect myself from car insurance fraud?

Tony

Good question.

Nobody wants to waste their time thinking about car insurance fraud, but considering the billions of dollars of profit in New York alone that have come out of car insurance fraud, it is no longer something to be considered a waste of time. Car insurance fraud is rising, and it is indeed one of the reasons that you pay so much for your car insurance premium. The companies that deal your insurance take into account all of the claims they have paid out and how much in order to decide how much they should charge on premiums, and fraud skews the numbers normally based on legitimate claims. It’s something that you have to watch out for, especially because sometimes you can become considered as part of the crime even if you didn’t know anything about it, just because you weren’t watching your back.

Yes, there are people out there who will use you in order to get unneeded money out of a car insurance company. And the only way to keep yourself from becoming an unwitting victim is to know what they do and how to avoid them. Here are a few ways.

• Repair shops.

Whenever you get into a car accident and you need to have repairs done on your car, you take it to a repair shop. However, not all repair shops are the cleanest out there. In fact, it is often the case that a repair shop will fix the bill that they tell the insurance company the repairs will cost so that they get more out of the deal. They can do this by over charging, or even by fixing things that weren’t broken in the first place.

So how do you avoid it?

This one’s easy and all it needs is for you to stay up to date in your claims process. You should be fully aware of all of the repairs needed for your vehicle and keep involved in the talks between your company and the mechanics. Shopping around for the best rates on car repairs also can’t do any harm.

• Instigated collisions.

Believe it or not, some people actually get into car accidents on purpose, and they’re not even suicidal. A lot of the time, car insurance fraud will be committed in this manner when both cars are involved. However, sometimes only one driver is aware of the fraud. These are the trickier ones, because it isn’t easy to cause an accident and then make it look like the other person is at fault. These are also the scariest ones, as they put your own health and history at risk.

So how do you avoid it?

Defensive driving is your friend. Watching the behavior of the cars around you can always clue you in as to when one of them is acting dangerously. Always keep at least three second distance between you and the car in front of you, unless you have no choice.

• Fake claims.

This is another one that takes many forms. Some who have their hands in high places can get police reports filed for accidents that never happened. They can scheme with their attorney to make claims and file lawsuits based on damages to car and body that don’t exist. These aren’t impossible to get, and sometimes people can get as much as a million dollars in damages for something that never happened.

So how do you avoid it?

Unfortunately, you can’t do much with this one unless you’re in the car insurance business yourself. These kinds of claims make the rates go really high, because they require the most money to be awarded out.

If you really want to keep away from car insurance fraud, just do the responsible thing and be vigilant, and keep track of everything in the claims process. Always take pictures after an accident and document everything.

Cheers,

Fashun Guadarrama.