A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 19, 2021

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Important facts to know...

Would you believe that fraud factors into at least one out of every three car insurance claims in cities like New York and Los Angeles? Believe it or not, this is an accurate statistic showing just how vulnerable you are to shady schemers who are trying to make a lot of money fast.

Over the years, scammers have come up with several different schemes to keep the insurance money coming in.

That’s why there’s an entire government agency called the Coalition Against Insurance Fraud dedicated to spotting fake claims and reducing the amount that’s paid out to scammers annually.

Since you pay for fraud in the form of inflated premiums, it’s your duty to report it when you witness it. Here are some of the latest scams and how to avoid them.

If you are a victim of auto insurance fraud and need better rates, start comparison shopping by entering your ZIP code above!

Where is insurance fraud the worst?

Fraudsters are running rampant in cities like New York, Los Angeles, Chicago, and Detroit, but that’s not to say that you only have to worry in these high-crime metropolitan areas.

Reports published by the National Insurance Crime Bureau have indicated that states at the top of the list for shady auto insurance claims are:

  • California
  • New York
  • Florida
  • Michigan
  • Texas
  • Maryland

Scammers are living all throughout the country, but the list above are the states where the most money is paid as a result of auto claim schemes. You may not be as vulnerable to insurance criminals in lower populated areas, but that doesn’t mean that you shouldn’t know what to signs to look for.

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Why should you worry about insurance fraud?

If you’re not a criminal and you’re paying your insurance premiums regularly, you might assume that you have zero to worry about when it comes to fraud.

What you might not know is that fraudsters who are developing these schemes are strategically and illegally taking money from your pocket to rake in huge profits.

If you’re not worried about fraud, you should consider the costs to you. When people make fraudulent claims, you’re the one to pay.

Your premiums will rise, your property is damaged, and your life can be left in shambles all because someone decided to file a fake claim.

If you’d like to avoid being a victim, you need to take the appropriate steps.

How much do your premiums go up because of fraud?

Scams are to blame for about $80 billion of claims payments each year nationally. Since that’s billions of dollars in lost revenue, insurance companies have to reevaluate operations costs and other expenses to determine if there’s a need to increase premiums company-wide.

One of the biggest causes behind premium increases is insurance fraud.

It’s not the insurance company that’s going to miss out in the revenues for long. The money has to come from somewhere, and it’s going to come from policyholders.

On average, households pay about $200 and $300 per year in extra auto premiums because of fraud.

Why do you pay a fraud fee to the state?

Not only will you pay hundreds of dollars extra due to the cost of insurance fraud, but in some states, policyholders are also charged fraud fees each term.

The fraud fee is used to investigate fraud, propose new legislation, and extend other anti-fraud efforts. California has a policy fraud fee and also a per vehicle assessment.

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What are some of the popular car insurance scams?

Scams are much more popular than the average policyholder thinks. You may have never even considered filing a fraudulent claim or taking advantage of someone else for a claim’s payout, but many people think about it and do it daily.

Here are some of the common scams to look out for:

– Staging a Rear-end Accident

A staged rear-end accident is commonly called the “swoop and squat” among scammers.

Typically, the scammer will swoop in front of an unknowing driver leaving them no time to stop. Some scammers slam on their brakes in the middle of the road with no warning. After the crash, the con man will claim exaggerated for a huge payout.

– Fake Third-Party Insurance Reps

It might sound like a scam out of the movies, but art imitates life. In this scenario, you’re involved in an accident just to be conned into using a particular clinic or body shop.

Someone will approach you claiming to be a claims representative only to convince you that you have to take your car to a particular shop.

– Fake Claims of Whiplash

It’s very common for scammers to claim phantom back pains and whiplash because it’s a hard type of injury to diagnose and it can’t be spotted on an x-ray.

Some fraudsters go as far as to pay off doctors to support their claims for a higher Bodily Injury payout.

How can you avoid the common insurance scams?

You can’t convince people to be law-abiding citizens, but you can protect yourself against scams.

Your driving record could be tarnished, your premiums could go up, and you could be left paying for your own car repairs all because someone decided to commit fraud.

Here are some valuable avoidance tips:

  • Always leave room to stop quickly and look for cars driving erratically so that you can anticipate a swoop and squat
  • Always call your insurer directly and don’t give your personal information to random third-parties
  • Let your agent know if the driver acted normal until the police came and then started to act injured
  • Take pictures of the damage and the scene to prevent fake damage claims
  • If you suspect a fishy claim, contact your state fraud bureau

You shouldn’t have to protect yourself against uninsured drivers and scammers, but you do because they’re out there. Get quotes for a broad coverage policy online and see if you can get more coverage for less money.

Try our FREE online quote tool and start comparing auto insurance rates! Enter your ZIP code below!