Car insurance fraud isn’t all elaborate schemes and setups. In fact, it’s easier than you think to commit car insurance fraud by accident, or to become a victim of a fraud perpetrated by someone else.
Sterling Soo Hoo, Vice President at Richard Soo Hoo Insurance in Boston shares his advice on the causes, consequences, and avoidance of car insurance fraud.
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What Is Car Insurance Fraud?
Generally speaking, car insurance fraud occurs when someone deceives an auto insurance company in order to benefit financially. Some forms of fraud are certainly more egregious than others: auto insurance fraud can range from a mistake when filling out paperwork to a staged accident.
Unfortunately, if you make an honest error (or small exaggeration) when it comes to your car insurance, it can still be considered fraud. Soo Hoo says that some of the most common accidents that lead to unintentional car insurance fraud are:
- Not giving your agent or company all the information regarding the use of the vehicle
- Not being advised that all household members that are related to the policyholder must be listed on the policy.
- Moving addresses or staying at another location without letting your company or agent know
More serious cases of premeditated, fraudulent activity are usually what come to mind when people think about auto insurance fraud. These cases include:
- Buying a policy after an accident has already occurred
- Staging a car accident
- Causing an accident intentionally
- Inaccurately reporting inflated repair costs
What Are the Consequences?
Being found guilty of car insurance fraud, accidental or not, can result in a policy cancellation or legal punishment. Even less serious consequences, however, can result in major headaches. If your policy is cancelled, for example, driving for any amount of time without valid coverage is extremely risky, and you’ll need to find a new insurer right away.
Looking at the bigger picture, Soo Hoo notes that car insurance fraud ends up further hurting the people who pay for coverage. “People who defraud insurance companies ultimately cause the rest of the insurance buying public to pay more in premium, not only because fraudulent claims must be paid out, but because money is spent investigating and processing those claims as well. In some circumstances, legitimate claims may also be denied or investigated if they resemble a fraud situation.”
How Do I Stay Out of Fraud’s Way?
Seeking help and staying on the defensive can help you avoid committing or becoming victim to fraudulent activity.
To prevent accidental car insurance fraud, Soo Hoo recommends working with a trustworthy agent to purchase and maintain your car insurance policy. He then advises to “give your agent as much information as possible” to ensure accuracy. Soo Hoo explains that many of the clients that he’s worked with over the years have found it easier to obtain reliable and fraud-free coverage with the help of a trained professional. “Many clients, from my own experience, realize that it’s a mistake to buy insurance on their own. There’s just too many pitfalls that will save you a few dollars today, but will cost you in the long run when you need it most.”
On the road, there are a few best practices for protecting yourself from fraudulent activity. The easiest way to stay in the clear? “Drive defensively,” Soo Hoo states.
If an accident does occur, “don't be afraid to call the police,” Soo Hoo says. “Don’t be afraid to make the other person wait. Call your agent if you’re worried (we deal with car accidents daily!), take lots of pictures, and if you suspect fraud, notify your agent so they can alert the company. Try to get witnesses to help you—you’d be surprised who’s willing to help!
So long as you’re familiar with the risks of unintentionally committing, or becoming prey to, a fraud situation, taking precautionary steps to avoid one isn’t difficult. Remember to keep your insurance agent updated on any information that could change your policy and always drive safely. A driving app like EverDrive can help you score your driving habits.
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