Auto insurance fraud is also a costly problem for drivers who have never been involved in a fraud scheme. Gradual accidents, fraudulent applications, unreliable repair shops, and fake agents cost billions of dollars each year. According to FBI estimates, annual costs for non-health insurance fraud exceed $40 billion, increasing from $400 to $700 per year for all family premiums.
What is a car insurance fraud?
Auto insurance fraud refers to all kinds of fraud in the world of auto insurance. This will bend the truth to get lower premium or bigger claim payments from suspicious individuals selling fake policies. All car insurance frauds are a problem, but some forms of fraud are easier to find than others.
Insurance fraud affects millions of people in the United States, including those who have never been directly involved in the fraud. According to the Bankrate Financial Fraud Survey, approximately one in three US adults (34%) have experienced financial or fraud for the past 12 months (since January 2024). Of those who reported fraud, 37% lost their money as a result. However, car insurance fraud also costs insurance companies money, which increases coverage costs for others, including those who have never been a victim of fraud.
According to Jim Quigle, former communications director for the Union against Insurance Fraud (CAIF), insurance fraud is “a major league crime that includes a wide variety of schemes.” As a daily driver, it helps you understand what insurance fraud looks like.
3 Common Types of Auto Insurance Fraud
Insurance fraud can sacrifice unsuspecting drivers who don’t realize they are dealing with fraudulent agents and repair shops. However, a driver may be a party negligent because he commits a fraud by lying to the insurance company. Below are three of the most common types of auto-related insurance fraud you should know about in 2025.
1. Agent fraud
Buying car insurance through an authorized agent may seem like an easy way to secure coverage, but be aware. Some scammers may poss as insurance agents to get your information and get payments, and will keep them insured.
This form of scam can be played in several ways.
- Unauthorized people are posing as agents of legal companies. You can receive communications from people who claim to be representatives of legitimate insurance companies. But the person is not actually an agent and while the insurance company doesn’t have your records, he’s really pocketing your premium payments.
- Authorized agents pretend to sell your insurance, but will not notify their company: Maybe the agent actually has a license, but decided to keep the premium on his own without letting the insurance company know that he is working for sale.
- Someone tries to sell insurance to you from a company that is not authorized to provide it: In this case, the insurance company itself is fraudulent and will not pay the claim even if it is in an accident. The documents received may appear legitimate, but the company is not permitted to sell car insurance.
Another common practice is known as “slides,” which allow unethical agents to slip through additional coverage they don’t want in your policy. This particularly sleazy car insurance fraud can add hundreds of dollars a year to the premium while padding a committee of agents. Vigilance drivers who have researched agents in advance and paid attention to what they are purchasing are less likely to fall victim to slide scams.
To avoid premium theft, drivers should work with trusted agents and always check coverage with their insurance company. Here are some ways you can find a trusted agent:
- Beware of the red flag: Aggressive sales tactics and delays in receiving key documents, such as insurance cards, are indications of working with fraudulent agents and companies. If you don’t receive your documents immediately, always follow up.
- Note the “too good to be true” rate: Everyone wants cheap insurance, but the National Insurance Commission (NAIC) warns that citations that are significantly lower than their competitors can be a sign of fraud.
- Research complaints: Insurance agents in good condition usually have accessible information about the background of professionals. While conducting your research, find out whether complaints have been filed against them and how serious those allegations are.
- Check the agent’s license. You can check your state license database to verify your insurance agent’s license.
- Compare advice: Just like comparing car insurance estimates, it may be beneficial to seek advice from multiple agents to assess recommendations. If the agent’s guidance differs significantly from the guidance of other agents, it is worth questioning the reliability of the information provided.
- Researcher: If you offer a quote from an insurance company whose name is not recognized, it will take you a minute to research the company before exploring and signing up for NAIC’s company search tool or top-rated career reviews. If you’re struggling to find information about insurance companies online, it may be a sign that they’re not a legitimate business.
Agent scams aren’t always easy. In March, a REDDIT user was posted on R/Scam and about his experience with fraudulent actors pretending to be an insurance agent:
2. Replacement of windshield ripping
Windshield replacement deductions vary by state, insurance company and insurance. However, three states – Florida, Kentucky and South Carolina – do not allow insurance companies to claim deductions for windshield replacements. These states’ uncruel and discreet glass replacement contractors use it as an opportunity to trick customers into replacing windshields, even with minimal damage.
This scam is especially common in Florida. How does this work:
- Someone approaches you to offer a free windshield repair or replacement: This is a promotion that is advertised by a prize provided by a local repair shop while you’re undergoing an oil change, a pitch from door-to-door salespeople, or someone who randomly approaches you in the car park. The scammer may point out minor or non-existent damage to the windshield, or simply frame this as a free interest for you.
- You may be asked to sign a piece of paper: This form is called Benefit Assignment (AOB) and gives the repair company the right to submit an insurance claim in your name and pocket the cash yourself.
- The shop will file an insurance claim for unnecessary repairs: While this claim may not be directly charged, flooding fraudulent windshield claims contributes to higher costs for insurance companies and promotes interest rates across the board in fraudulent areas. Multiple fraudulent claims filed by the store can lead to cancellation or non-renewal of the insurance policy if the insurance company notices fraud.
- An incorrect repair may not be a reliable repair: Companies that commit this type of fraud may not have the correct equipment or training to complete high-quality windshield repairs, leaving vehicles more vulnerable to damage than before.
Auto glass fraud has seen a recession in Florida in recent years thanks to the passage of Senate Bill 1002, which banned the use of AOB foam by car glass replacement or repair shops. Since the bill was signed into law in 2023, the Florida Institute of Judicial Reform (FJRI) has recorded an 83% decline in auto glass litigation.
Talking to neighbors and others in your community may help you find signs of a common local auto glass scam. At the local Florida Reddit forum in 2024, users shared their experiences with windshield scams.
3. Avoid car insurance premiums
While it is important to be vigilant against attempted fraud by agents and repair shops, you should also be aware of Premium Evers, the most common type of fraud committed by policyholders. While you may not be able to commit fraud when signing up for insurance, it may be easier than imagining being careless in this category.
Premium avoidance involves providing insurers with false or incomplete information to qualify for a lower fee. Some of the most common tactics for premium evasion include omitting drivers such as spouses with poor driving records or teenagers with higher premiums, or giving others an address to earn a lower fee. Also, if you fail to report an accident or violation when asked, you may be guilty of insurance fraud.
Any fraudulent behavior or attempts to avoid premiums can lead to claims that your policy has been cancelled or redisplayed and rejected. If your actions turn out to constitute a fraud, you can even be charged with a crime in most states. Take steps to avoid these consequences:
- Always be honest with your insurance company: When purchasing a policy or submitting a claim, we will make every effort to provide accurate and complete information. Don’t send back any information as you fear that your rate will rise. Doing so could lead to more trouble.
- Keep a detailed record of your accident and ticket: If you’re not good at record keeping, you can forget exactly what happened when you received your ticket or during an accident. However, if you do not report this information accurately, it could lead to a policy that has been deleted or cancelled if your insurance company finds information that is inconsistent with what you told them.
- Work with agents to find affordable rates: Many examples of rate avoidance can arise from a combination of despair and goodwill. If you are trying to find affordable rates for yourself or your family, try working with a local independent agent or broker who will help you maximize your discount, rather than defeating the final strategy.
What are the other types of car insurance fraud?
Auto insurance fraud can take many forms. At the heart of this, the goal of most types of car insurance fraud is to withdraw more money from insurance providers than is usually issued. Below are examples of fraud:
- Gradual accidents: One of the most famous types of insurance fraud, this type of fraud involves intentionally causing a collision with another vehicle or pedestrian in order to receive fraudulent payments.
- False claims: False claims are often closely related to gradual accidents, involving individuals who are manufacturing or exaggerating events to file insurance claims for damages that are not related to the incident that did not occur or the covered event.
- Submitted retrospectively: Trying to file a claim for an incident that occurred before your insurance comes into effect is a violation of your insurance contract.
- Fake a stolen car: A vehicle that reports it stolen by an insurance company is a form of fraud if it is not stolen with the intent to receive compensation for its alleged loss.
- Forgery or Forgery: If you are involved in an accident, insurance pays some of the damages you experience and decorate or manufacture the extent of the injury after the accident that claims that higher coverage is fraud.
It’s also worth knowing what it is do not have scam. In the age of online insurance shopping, you may encounter lead generation websites that ask you to enter your personal information in exchange for car insurance quotes. Some sites will return actual estimates, while others will sell your information to insurers to make a profit. While this is not a form of fraud, you may prefer to do business directly with an insurance agent or a trusted comparison site to avoid unsolicited calls from multiple insurance companies.
Tips to avoid car insurance fraud
The first step is to know that car insurance fraud exists. To protect yourself, it is beneficial to know some additional ways to avoid these scams.
- Document all incidents. This includes damages from the accident, police reports and bills. This will help you fight future claim disputes.
- Look for abnormal behavior: If something seems suspicious, trust your instincts. For example, a fellow driver or mechanic who doesn’t provide much information about themselves but expects that personal or payment information from you could be a source of concern.
- Please keep your vehicle insurance information private: Apart from exchanging post-accident information, processing directly with the insurance company, or processing official claims and reports, we recommend that you consider being vigilant with other parties requesting information about your policy.
- Check the legitimacy of your agents and insurance companies. A fraudster may poss as an insurance agent, agent, or insurance company to sell fraudulent insurance. You can use the state insurance database to check if your agents and insurance companies are genuinely licensed before providing personal information and payment details.
- Use defensive driving practices: Driving defensively reduces the risk of getting involved in an accident and being unintentionally victimized by a car insurance fraud. Maintain the distance between the car in front of you and the driver, drive speed limits, scan your surroundings to limit potential accidents.
- Recheck the price: Question the insurance price that seems too good. If you receive a much lower car insurance quote than competition, it could be a fraud or compensation that is filled with exclusions that will not be discovered until you accept coverage.
- Report suspected fraud: You can report insurance fraud in many places to your insurance company, insurance company, your state’s Bureau of Insurance Fraud (if applicable), the FBI, or the National Insurance Crimes Bureau (NICB).
