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Cost of car insurance fraud

Car insurance fraud is costing us all. Look out for common types and learn how to help combat the issue.

Upset driver at scene of a car accident

Insurance fraud occurs when someone intentionally provides false information to an insurance company for money he or she is not entitled to receive. Fraud is a major issue for all types of insurance, costing Americans billions of dollars each year. And when it comes to car insurance fraud, it's not only costing drivers money, it's putting them at risk on the road.

How fraud affects you

According to the Insurance Research Council, 24 percent of Americans view claim padding behavior as acceptable, and 10 percent of Americans believe insurance fraud doesn't hurt anyone.

However, the Coalition Against Insurance Fraud estimates that fraud may cost insurance consumers $29 billion a year. Why should that matter to you? Because customers end up absorbing a lot of the cost, which may amount to about 14 percent of your personal car insurance premium.

Additionally, schemes that involve staged car accidents or fake crashes put other drivers and their passengers at risk on the road.

Types of car insurance fraud

Here are some of the most common types of car insurance fraud to look out for:

  • Injury fraud - either through staged car accidents or fraudulent claims leading to payments for unnecessary medical treatment or treatment not actually received
  • Exaggerated claims damages - used to cover the deductible
  • Conspiracy with medical providers and attorneys - receiving unnecessary medical treatment or getting payments for treatment not actually received
  • False registration or documentation - registering a vehicle in a place where premiums are lower, understating annual mileage or misrepresenting the use of a commercial vehicle

Help fight fraud

State Farm® supports movements and partnerships to help reduce car insurance fraud and educate the public about its impacts. Individuals also play a vital role in fighting and rejecting participation in fraud. What you can do:

  • Understand your rights and responsibilities in your insurance policy, and contact your State Farm insurance agent with any questions.
  • Fill out and carefully check your insurance application forms for mistakes.
  • If you get in an accident, make a detailed record of all persons involved, and take pictures at the scene.
  • Refuse to sign any documents or agree to any terms at the site of an accident.
  • Call the local police if you suspect car insurance fraud.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. State Farm makes no guarantees of results from use of this information.

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