Scams are very common these days, despite the best intentions of all concerned authorities or regulators to prevent them from happening. Let’s understand what is car insurance scam?
Insurance scams occur when an insurance company, agent, intermediary, or customer makes a deliberate trickery to seek dishonest gain. It may occur in the process of buying, using, selling, or underwriting insurance.
The insurance industry is also plagued by various kinds of scams and even though the numbers have been contained, fraudsters are coming out with novel ways of duping people. When it comes to auto insurance, not only the customers, but the insurance companies, as well as the agents, commit certain frauds that lead to massive financial losses.
Let’s share with you the most common forms of fraud happening in the industry so that you can be careful:
Frauds by Agents
There are some insurance agents, who will sell you a plan, will share all details with you, and gain your trust and the payment for buying the policy. And after that, they will vanish! You won’t receive your car insurance policy; there’ll be no coverage on your car and only at the time of an accident, you will realize the fraud. To increase their commission, some agents try to sell you add-ons that you don’t even need. This will increase your premium without giving you substantial benefits at the time of an emergency. There will be fake telesellers calling on behalf of reputed insurance companies to sell you plans over the phone. Once you agree, they will send someone to collect the payment, and before you know it, you would have lost your money.
Fraud by Insurance Companies
This may not be widespread but is prevalent in the market. To reduce their obligations, auto insurance companies tie up with garages to repair the cars. Once the claim is filed and the car comes to repairs, either duplicate parts or low-quality parts are used to replace the damaged body and machinery of the car. This affects your car’s performance, life, and valuations later on while reducing costs for the insurer.
Also, fake insurance companies which are not licensed by the IRDAI defraud customers by collecting car premiums with zero intention of paying claims. Such so-called insurance companies may offer car policies at a lower price than the competitors’ prices. Customers should be aware and ensure that they are dealing with a legitimate, licensed insurance company before paying for a policy.
Fraud by Customers
- Organized Accidents: Some people intentionally organize an accident by suddenly breaking into the middle of the traffic so that the car driving behind them bumps into them. The liability will then lie on the driver hitting the car, and the fraudster will be able to claim damages and get his already damaged car get repaired at no extra cost.
- Some people claim their car has been part of a hit and run accident while the reality has they crashed their car somewhere, but to get the claim, they cook up a lie.
- Some customers go as far as to stage car thefts just to claim damages covered in their car insurance policy.
- Claiming fake injuries is one of the most common types of fraud. Some injuries can’t be detected even by medical professionals like whiplash, and fraudsters use it to extract money from insurers.
To avoid such frauds, it is better to deal with the insurance company directly and not trust the shrewd agents. However, all the agents may not be the same, and some of them provide excellent after-sales service to their customers.
Read this article to update yourself: Tips to buy Online Vehicle Insurance
Car insurance in India is a relatively mature market, especially after the government regulations of making it mandatory for every car to have insurance coverage. Therefore, most players are in for the long term. It is important to buy insurance from reputed and licensed sellers to be sure of buying the right product and avoid Car insurance scams.
Be aware, cautious, and safe.