Auto Insurance Fraud: Is It Easy For A Driver To Cheat An Insurer?

Car enthusiasts often complain about the “trick” of insurance companies. Say, not only do they ask for a lot of money for insurance, but they also look for various reasons not to pay compensation. However, as it turns out, clients of insurance companies are also often not averse to “throwing” the insurer.

There are people all over the world who are willing to cash in on insurance companies. This happens most often in countries where the majority of the population is covered by insurance. For example, according to expert estimates, in the United States, insurance companies are forced to pay out indemnities to fraudsters totaling up to $ 15 billion annually. In Canada, local Ostap Benders manage to defraud insurers for 1.3 billion Canadian dollars, which is about a tenth of all insurance claims. The situation is approximately the same in Germany. So, recently, only one criminal group in this country fabricated 7740 road accidents per year, having received huge amounts of payments from insurers.

The client is cunning for inventions

Insurers can be deceived not only by their clients, but also by their own employees, business partners or hired agents. There are several known types of auto insurance fraud. The most common type is an attempt to obtain an insurance claim that exceeds the amount that the car was damaged. In this case, the victims try to provide inaccurate data when drawing up a contract or in an application for compensation for damage. For example, they overestimate the real cost of a vehicle or repair and spare parts. To get more money from the insurer, they often resort to forgery or falsification of documents – an expert overstating the amount of damage, “inflating” the cost of repairs and spare parts, requirements for installing expensive tuning parts, etc. In addition, sometimes they try to hide some circumstances that matter to assess the insurance risk (see examples). Some “cunning” citizens insure a car at once in several insurance companies in order to receive an amount for repairs after an accident that is much higher than required.

A fairly common type of fraud, which, however, is often disclosed, is falsification of an insured event. This could be a deliberate accident or other incident organized by a client of the insurance company. It is also popular among crooks to issue a retroactive insurance contract. This is possible if the representative of the insurance company is inattentive or participates in collusion.

The insurer is not an investigator

Modern insurers are much less prepared to counter illegal transactions on the part of their clients than their foreign counterparts. In different countries, insurance companies maintain a staff of professionals who carry out operational investigative work. The problems of insurance fraud in the West are dealt with by special departments of the state security services. But when insurers are prohibited from investigating. And the only government agency that is interested in the relationship between the insurer and the policyholder is the Financial Services Market Regulatory Commission.

Domestic insurance companies counteract fraudsters on their own, occasionally with the support of experts and lawyers. Only a few major insurers maintain an anti-fraud (or economic security) department. Specialists in this area are not trained anywhere, therefore companies often use the services of former police officers or employees of law enforcement agencies.

Who is suffering?

To counteract fraud in auto insurance, a number of insurers have attempted to create a database of vehicles for which indemnities have been paid. On the other hand, the creation of a register of insurance agents, as well as a national system for their preparation, would be a much more effective step to minimize fraud. With proper control over their own employees, agents and partners, well-established professional work of the staff, insurers could protect themselves from deception.

Educating the public about the culture of insurance can be another effective way to combat insurance fraud. For example, in order to avoid abuse by foreign citizens in the event of an accident, the bureau issue leaflets to our motorists, which indicate what to do in a particular situation related to an accident on the territory of another state.

Thus, insurers have the ability to counter fraudsters. But for now it is more profitable for them to hush up the facts of fraud – in order to preserve the reputation of their company. But the risks of losses due to fraud, as well as the costs of maintaining a staff of lawyers and economic security services, insurance companies include in the rates at which honest citizens are forced to pay insurance premiums. Moreover, because of the risk of being deceived, insurers begin to suspect of fraud almost every client who gets into trouble and demands payment.