Application fraud happens when you intentionally give false information on a car insurance claim. It is the most common form of car insurance fraud, causing up to two-thirds of all denied insurance claims. People will lie or exaggerate about an accident, a theft, or an injury when they are making a claim.
Drivers who live in high crime areas where insurance rates are high will register their cars in less expensive areas. This is common practice in cities where there is high crime. It is illegal and could cause drivers to have their insurance policy canceled, but it is hard to prove and happens all the time.
This is also called “Owner Give-ups.” It covers a wide range of car insurance frauds, from abandoning or dumping the car, to burning it or even selling it outright – and then claiming it was stolen. Another tactic is a “Jump in” when someone is not in the vehicle at the time of the accident or staged accident.
Airbag Replacement Fraud
Airbags do more than save lives, they make money for fraudsters. This is how it works – shady car shops use salvaged airbags and replace them with a customer’s airbag. They make it look like the airbag was deployed so they can claim more in an insurance payout. This is big business in cities like Los Angeles, Riverside, and San Diego, California. Replacing a good airbag with a deployed one can lead to a year in prison and a $5,000 fine.
Tow Truck Scams
Bandit tow trucks are very common in big cities, and they should be avoided at all costs. You need to ask for proper identification from any towing service that pulls up if you’ve been in an accident or if you are stalled on the side of the road. A bandit tow truck will insist you go to their shop and then they will hold your vehicle ransom until you pay them hundreds of dollars. It sounds implausible but when you’re stranded on a road or in an accident, your emotions take over and you may not always make the right decision.