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Auto insurance fraud is an attempt by a driver or passenger to illegally obtain a claims payment from an auto insurance company. In most states, auto insurance fraud is a felony. Today, criminals are developing increasingly complex schemes to defraud auto insurance companies.
Theft Fraud
Theft fraud schemes involve staging a vehicle theft to collect insurance money. In many cases, the perpetrator arranges for the destruction of the vehicle, and it is later found burned or heavily damaged.
Phantom Vehicles
Another popular type of auto insurance fraud involves creating a fake vehicle serial number to obtain an auto insurance policy, and then reporting the phantom vehicle as stolen.
Staged Accidents
Aside from theft and phantom vehicle fraud, this is one of the most popular auto insurance fraud schemes. It involves having a third party deliberately collide with the vehicle so that the owner can receive insurance money.
Consumer Cost
According to the National Insurance Crime Bureau (NICB), auto insurance fraud adds $200 to $300 each year to the average driver's car insurance premiums.
Prevention/Solution
You can help reduce the cost of auto insurance fraud by reporting suspected fraud to your local police station, your state's insurance department and the NICB.
Source:
Edmunds: Auto Insurance Fraud -- What it Costs You
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