5 Common Types of Auto Insurance Fraud
Within the Attorney General’s Criminal Justice Division sits Nevada’s Insurance Fraud Unit, an elite group of professionals committed to prosecuting criminal violations such as fraudulently submitted insurance claims. To illustrate what these professionals encounter daily, here are the five most commonly exploited types of insurance fraud:
1. Abandonment & Destruction
In this scheme, the fraudulent individual abandons and/or destroys the vehicle with the intent of reporting it as stolen and collecting the car’s insurance value. This can obviously go very wrong if the person is caught in the act of destruction, or if the “missing” car is located. Criminals have had to get more creative with this one, moving beyond the “routine” burning of a vehicle or drowning of a vehicle, as these are quickly investigated. Mother Nature did some detective work of her own in drought ridden areas such as Las Vegas where abandoned vehicles started appearing as lake water receded.
2. Incorrectly Reported Repair Costs
Not all insurance fraud is conducted by the owner of the vehicle. This one is a sneaky trick that unscrupulous mechanics and body shops employ. If you’ve been in an accident and had to have repairs to your vehicle, you know all about going to the shop and hearing how much of an expense you were spared by having insurance. You feel good, but insurance companies are largely left to take the shop’s word for the work done and also forced to trust that the mechanic used the top-of-the-line parts the quote was based upon not some refurbished knock-offs. This is exactly the reason why insurance companies are now encouraging customers to use their “preferred” shops to avoid situations such as these.
3. Parking Lot Vultures
It goes without saying that all day long you are exposed to messages telling you to buy something. You are not even safe walking from your car to the grocery store entrance. In this scheme, ruthless windshield repair companies send their employees out into public to confront people near their vehicles. The car owner is told he or she needs a new windshield based upon the tech’s observation. The tech goes further in saying that the windshield can be replaced right now, on the spot, with no money from the owner. The company proceeds to bill the insurance company for a repair that may not have even been necessary.
4. You Live Where?
In this scheme, the devious car owner does not register the vehicle where he or she actually lives, but rather registers the vehicle in another part of town. Most people would not catch how this saves anyone money, but to the criminally minded, insurance premiums are the target. As a rule-abiding car owner, you may have noticed that when you moved across town your premiums changed. That is because insurance companies base their rates on many factors, one of which is the garaging location of the insured vehicle. For example, a car registered in the North Las Vegas zip code of 89030 might have a premium cost of meaningful difference to one registered near The Legacy Golf Club of 89074.
5. Cutting Airbag Corners
This one falls back on the mechanics. In this scheme, the auto shop does not replace the airbag after it is deployed, but rather stuffs the old one back in the cavity while billing the insurance company for the replacement. More than anything, this is incredibly dangerous to the vehicle owner as the airbag will be ineffective in a future accident. Consider further that in Las Vegas, drivers are 21% more likely to be involved in a car accident than drivers across the nation1. The risk to life does not come anywhere close to the fraudulent financial gain.
Bottom line: Fraud is illegal. Don’t do it.
Stats: “Report: Las Vegas drivers more prone to accidents”. Las Vegas Sun.