Insurance scams are becoming more and more prevalent, thanks to fraudsters’ efforts to perfect their skills in order to take advantage of insurance consumers who want to protect their assets. Incidentally, cybercrime is increasing as well, which correlates with the rise in insurance fraud and scams.
Thankfully, if you know what to look out for and learn the tactics of the criminals, you can protect yourself and your insurance premiums as well. It’s also important to know what protections you can put in place in case you do become a hapless victim of an insurance scam, despite your best efforts to educate yourself and protect your assets.
Read on to learn more about insurance scams and determine if you are at risk and what you can do to reduce your risk:
What is Insurance Fraud?
Insurance fraud is a type of crime that victimizes insurance companies and insurance consumers at an ever-growing pace. In fact, the Coalition Against Insurance Fraud estimates that around $80 billion in fraudulent claim payments are made annually. Furthermore, the Federal Bureau of Investigation (FBI), found that insurance scams and fraud cost the average family between $400 and $700 annually in increased insurance premiums.
Common Types of Insurance Scams
There are many types of insurance scams that have become increasingly common. The following are just a few short examples of what to look out for:
- Shady Contractor: This scam happens if your home is damaged in some way. The “contractor” comes up to your home, gives you a low cost for your repairs (likely significantly lower than other contractors).Then, they pressure you to sign a contract or pay up front for the work. The shady contractor will skip town, and you will never see them again, or they might begin the work but leave it undone or do inferior work with substandard materials.
- Unprompted Tows: This scam happens after you have been in an accident, or you are broke down on the side of the road, really any scenario where your car is unable to drive. Suddenly, a tow truck driver shows up miraculously, unsolicited, seemingly saving the day. They tow your car and the next thing you know you are hit with an inflated bill perhaps including services you never asked for or even received.
- Invisible Passenger: This scam occurs after you have been in an accident. Let’s assume you didn’t have the police come because it was just a small fender bender. So, you exchanged information with the other driver and off you went. Then, you find out from your insurance company that the passenger of the other car is filing a claim with your insurance company for injuries sustained in your accident. Thing is, there was no passenger in the other car, but you don’t have a police report or witness statements to prove this to be true.
To avoid this particular scam, we recommend filing a police report directly after an accident to avoid he said/she said. We also recommend that the client call their insurance agent immediately, as well as take photos of each car in the accident, the licenses plate, insurance card, and driver's license of all parties involved if for some reason a police report isn’t made. You may even want to record a verbal statement on your phone of the other driver if they are admitting fault at the scene.
Steps to Take to Protect Yourself
Thankfully, you aren’t helpless in these situations and can make yourself much harder to victimize by taking the following precautionary steps:
- Know Your Policies: You should know your current insurance policies well. Print out copies and have them on hand should you need to reference them. The point is to know what you are paying for, what is covered, what isn’t and what you can expect to be reimbursed if you have to file a claim.
- Pay Only for Services You Have Received: Later, we will look at some common scams to look out for, but know that many scams have to do with charging you and/or your insurance company for services that you either didn’t request or never received. Therefore, be sure to withhold payment for any potentially dubious service.
- Know and Trust Your Insurance Agent: Finally, in order to protect yourself from insurance scams, one of the best steps to take is simply knowing your insurance agent and trusting them. If you know your agent, then you will be less likely to fall victim to a scam where someone is pretending to be your agent or a representative from your insurance company.
Scams Are on The Rise…Are You at Risk?
Many people fail to report a scam once they have become a victim simply because they are embarrassed, felt it was futile or didn’t know how or where to report it. However, reporting establishes accurate statistics on the number of people affected, which in turn alters the way the FBI and other law enforcement agencies devote resources to breaking up fraud rings. In most cases, it’s best to begin with the police (a must if you want to make an insurance claim on stolen property) and report compromised information to your bank and insurance provider or agent as soon as possible.
Protect Yourself and Stay Safe
By taking the advice outlined above, you will be much less likely to become a victim of these increasingly common insurance scams.
