How to Prevent Auto Insurance Fraud

The Growing Epidemic of Auto Insurance Fraud

Auto insurance fraud is a significant issue in the United States, with the FBI estimating that it costs the industry over $40 billion annually. This staggering figure translates to an average increase of $400 to $700 in annual premiums for the average American family (FBI). Understanding the various types of fraud can help you avoid becoming a victim and contribute to reducing these costs.

Common Auto Insurance Scams

Staged Accidents

One of the most prevalent forms of auto insurance fraud involves staged accidents. These orchestrated events are designed to make it appear as though the victim is at fault, leading to fraudulent claims for vehicle damage and personal injuries. Here are some common types of staged accidents:

1. Swoop and Squat

   • How it Works: This scam involves three cars. Two of the cars are driven by scammers, and the third is the unsuspecting victim. The "squat" car positions itself in front of the victim's car, while the "swoop" car cuts off the squat car, causing it to brake suddenly. The victim then rear-ends the squat car, and the swoop car drives away.
   • Outcome: The victim is left to pay for the damages and any injury claims, as the swoop car is often untraceable.

2. Side Swipe

   • How it Works: This scam typically occurs at busy intersections with two left-turn lanes. The scammer positions their car in the outer left lane and waits for the victim to enter the inner left lane. As the victim makes the turn, the scammer swipes the side of their car.
   • Outcome: The scammer claims the victim drifted into their lane, leading to a fraudulent insurance claim.

3. Panic Stop

   • How it Works: In this scam, an old car filled with passengers drives in front of the victim's car. One of the passengers watches the victim for signs of distraction, such as using a cell phone or adjusting the radio. When the victim appears distracted, the driver of the scam car slams on the brakes, causing a rear-end collision.
   • Outcome: The victim is blamed for the accident and must pay for damages and injury claims for all passengers in the scam car.

The Impact of Auto Insurance Fraud

Auto insurance fraud doesn't just affect insurance companies; it impacts everyone. When insurers pay out fraudulent claims, they pass the costs onto consumers in the form of higher premiums. According to the Coalition Against Insurance Fraud, fraud adds an estimated $80 billion to the cost of insurance annually (Coalition Against Insurance Fraud).

How to Protect Yourself

While it may be challenging to completely avoid these scams, there are steps you can take to reduce your risk:

1. Maintain a Safe Following Distance: Always keep a safe distance between your car and the vehicle in front of you. This gives you more time to react to sudden stops.
2. Stay Alert: Avoid distractions while driving. Keep your focus on the road and be aware of your surroundings.
3. Use a Dash Cam: Installing a dash cam can provide valuable evidence in the event of an accident, helping to prove your innocence if you're targeted by scammers.
4. Report Suspicious Activity: If you suspect that you've been involved in a staged accident, report it to your insurance company and law enforcement immediately.

Conclusion

Auto insurance fraud is a serious issue that affects everyone. By understanding the common types of scams and taking steps to protect yourself, you can help reduce the impact of fraud on the insurance industry. Stay vigilant, drive safely, and report any suspicious activity to help combat this growing problem.

For more information on how to protect yourself from auto insurance fraud, visit the National Insurance Crime Bureau.