Most people think that filing an auto insurance claim is a hassle and would love to avoid dealing with fender-benders or broken windshields. However, some desperate folks go out of their way to file claims in hopes of cheating the insurance system.
The price of crazy crimes
Frank Scafidi, a spokesman for the nonprofit National Insurance Crime Bureau, says an auto insurance policy could be canceled if someone commits insurance fraud. “This is a company decision based on specific facts, but if an insured (driver) has been caught in the act of committing insurance fraud, that would certainly be cause for cancellation,” he says.
Should a crook elude a policy cancellation, the insurance company could deny a claim for damages that turn out to be phony. So, in addition to facing possible cancellation, crooks could be looking at footing the bill for their foiled scams, Scafidi says.
Unfortunately, insurance fraud drives up the rates for the guilty as well as the innocent.
Claims activity is among the factors that insurers use to set rates, Scafidi says.
More claims in a certain geographic area will, over time, "tend to push rates higher," he says. "The converse is equally true. All fraud has an impact on rates because the money the industry loses to fraud each year -- which is around $30 billion -- is covered by higher premiums for all insurance consumers.”
Here’s a look at three particularly crazy auto insurance scams.
"Chop shop" scheme
Scafidi says one agent from the insurance crime bureau worked on a case in Tennessee helping the Memphis Police Department execute a search warrant at a "chop shop," where stolen cars are taken apart so that the parts can be sold. The special agent found a 2008 Chevrolet Avalanche that had been torn apart and had several parts missing, Scafidi says.
When police questioned the shop owner, he insisted the car wasn’t stolen, according to Scafidi. In fact, he produced a receipt from driver, who had authorized the work. Authorities say the man sold his car for parts but claimed it had been stolen. The car owner later was accused of auto insurance fraud.
Burnt potato chips
Linda Webb, a former white-collar crime detective and a member of Patriot National Insurance Group, once caught a crook who committed arson using a bag of potato chips as kindling to set his car ablaze.
“He couldn’t make his payments,” Webb recalls, “so the driver tried to burn his car and then claim it was stolen to collect the insurance money.”
The scammer left the windows closed, so the fire couldn’t fully burn.
“Instead, what was left was a burn mark on the seat of the car, and the driver still had to make (car) payments,” Webb says.
The case of the missing tires
Scafidi says a man once drove his Lincoln into a rural area to burn it with the help of a friend who drove another car. The goal: to make it look like the Lincoln had been stolen and vandalized. Before they set the Lincoln on fire, they decided to remove the tires and stash them in the back of the getaway vehicle. The getaway car encountered mechanical troubles down the road, though.
Being in a rural area with one wrecker service, the getaway car was picked up and towed away. The same wrecker picked up the Lincoln, including the stashed tires. It didn’t take much to put two and two together; the owner of the Lincoln confessed to burning his car.