How to Avoid Car Insurance Fraud

By Desiree Baughman
Desiree maintains insurance licensure in 46 states, and by combining years of experience as a writer and insurance professional, she delivers information consumers can easily relate to and understand. A graduate of Sweet Briar College with a diverse writing portfolio, she regularly serves as an expert source and commentator for respected outlets like CBS Money, Bankrate, and

How to Avoid Car Insurance FraudThe number of accidents are down, but the number of personal injury claims are increasing. A startling Insurance Research Council (IRC) survey revealed that 35% of Americans believe they have the right to exaggerate insurance claims under some circumstances. Unfortunately, fraudulent car insurance claims raise the cost of insurance for everyone. If you’re not part of the problem, you could be a part of the solution. Car insurance fraud isn’t limited to falsifying or exaggerating claims – it can happen right before your eyes. So how can you spot fraud when it occurs? This article covers some of the most common tricks and traps.

Fraudulent Accidents

Both individuals and teams have come up with lots of schemes to get paid out by insurance companies. They employ a dizzying array of tactics, but these three are the most common:

The Swoop and Squat: There are two “scammer” cars and of course the victim’s car–yours. The “squat” vehicle will be positioned in front of your vehicle. Then the second vehicle, known as the “swoop” car, will pull ahead of both of your vehicles and suddenly slam on the brakes. This potentially causes the victim to smash into the rear of the squat car. Away the swoop car goes, and the victim is almost guaranteed to be left “at fault” given that most rear-end accidents are deemed to be the fault of the rear driver.

Here’s what’s particularly frustrating about this situation: law officials are fully aware that this happens, but there’s really nothing that they can do about it. Regardless of what you may tell the police officer who arrives at the scene, and no matter how sympathetic they may be to your situation, they won’t have any evidence to support your version of events.

The Side Swipe: This is one to look out for in large intersections that have two left-hand turn lanes. The scammer will position his or her car in the outer lane, while the victim turns left from the inner lane. Should the victim’s car even slightly drift into the other lane, the con artist will side swipe the vehicle (though many ruthless scammers will be the one to drift into your lane and still claim that you’re at fault).

The Panic Stop: This scam is essentially the same as the swoop and squat, only without the “swoop” vehicle. The scammer will pull his or her vehicle in front of a potential victim, and the passengers in his or her car will be watching you for any signs of distraction. When the passengers think that your attention may not fully be on the road they advise the conniving driver, who then slams on his or her brakes, resulting in a rear-end collision.

In any of these situations, your best defense is to:

  • Stay alert, keep your eyes on the road and don’t allow yourself to become distracted
  • Obey all speed limits
  • Also obey the 4-second rule for following distance

Other Car Insurance Fraud Schemes

Now here’s the more sticky and even trickier end of car insurance frauds. Fortunately these don’t usually affect other drivers as directly as fraudulent accidents do, but they do raise the cost of insurance for everybody, and are something to look out for.

The 30-Day Special: Should the owner of a vehicle be able to conceal their vehicle for 30 days or more, then he or she may be able to take advantage of the “30-day special”. The owner of a vehicle will lie about his or her car being stolen, while at the same time arrange for the vehicle to be hidden or destroyed. After 30 days, in most states an owner can report his or her hidden vehicle stolen and try to claim an insurance settlement.After the car has been claimed as “stolen”, law enforcement will often find it parked at the bottom of a lake or burned to a crisp in the middle of the desert.

Vehicle Export Fraud: Given how complicated this type of fraudulent activity can be, it’s more rare. In this situation, the fraudster will obtain a bank loan for a vehicle, purchase it, and obtain insurance for it. The owner will then report the new vehicle stolen to law enforcement, but what he or she has really done is illegally shipped the vehicle overseas to sell on the black market. So not only does the con artist collect money from the insurance agency, but he or she also makes a hefty profit from the illegal sale of the vehicle.

Ghost Cars: Though hard to pull off, sophisticated fraudsters have been able to create cars from thin air, forging the title and registration for a vehicle and then obtaining insurance for it. They report the vehicle stolen, file an insurance claim, and collect the settlement.

Hit and Run: Here’s one that’s far more common: the fraudulent “hit and run”. If a driver hits a pole or concrete wall with his or her car, they may call into the insurance agency and claim it was a hit and run rather than own their fault in damaging the vehicle. Or, worse yet, a person you’ve never known may create a story (which could involve a lying witness) that they witnessed you hitting their vehicle and taking off without leaving your insurance information.

5 Steps to Take to Protect Yourself from Car Insurance Fraud

Whether you think you’ve been involved in a staged auto accident or just want to protect yourself in the future, here are some tips that may help keep you out of trouble:

  1. Write It Down: Document, document, document. Take down any involved vehicles’ license plate numbers as well as their make and model, and obtain the phone numbers and addresses of everyone involved – including the driver(s) of the other vehicle(s). Write down the insurance information of all drivers.
  2. Take Pictures: Almost every phone has a camera these days, so make use of it for something other than taking “selfies” for Facebook and Twitter. Take pictures of the offending car and note any damages and injuries that they are claiming. Snap any photographs of the victim or victims smiling, laughing or seeming to be in good health after the accident so he or she can’t easily claim to be in poor condition or medical distress in the hours that follow.
  3. Call Up Law Enforcement: The officer who shows up at the scene will be able to take a non-biased third party account of all that happened, which can protect you from any “he said, she said” situations which can occur between you and the driver of the other vehicle.
  4. Answer Every Summons: Should you be summoned to court, make sure that you’re there with all of the documentation, photographs and additional information necessary to make your case (and if possible, bring your attorney or your insurance company’s attorney along). In cases of fraud, oftentimes the criminal will request a delay, as they weren’t expecting you to attend.
  5. File a Complaint with the State Insurance Commissioner: Though a lengthy process, it’s one worth taking. Register a complaint with the State Insurance Commissioner and provide them with your paperwork. Also contact the National Insurance Crime Bureau at 1-800-835-6422. Even if you don’t receive your money back based on the complaint, it puts the con artist on the government’s radar and may even assist in putting him or her behind bars.