Recession Creates Auto Insurance Fraud Increase

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Things to remember...

  • Auto insurance fraud is against the law
  • There are many different types of insurance fraud
  • People who cannot afford their payments should contact their loan servicer

An economic downturn can be devastating in just about every area of life, and auto insurance is no exception.

One of the more disturbing things that we’ve seen happen over the past few years is a situation in which people who have a car loan on a vehicle that they can no longer afford get desperate.

Rather than just allowing the car to be repossessed (and having their credit destroyed in the process), they try to deal with the impending loss of their vehicle another way.

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How Auto Insurance Fraud Works

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One example of this kind of fraud happened a few years ago in the Southern California area. As it turns out, there was a group of arsonists for hire that would participate in a particular type of auto insurance scheme.

It seems that people who owned vehicles that they wanted to get out from under would go to a particular car dealership in the hopes that they could trade the vehicle (usually an SUV that gets poor gas mileage) in for a less expensive vehicle.

The procedure was that the used car dealership that these people visited told them how to get in touch with the arsonist ring.

The arsonists would instruct the owners to leave their keys in the ignition, along with $300 in cash in the glove box.

The arsonists would then take the car to a rural spot, where they would then set the car on fire.

Once the car was burned, the owners would contact the police and report their vehicle as stolen.

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Police and Auto Insurance Fraud

Unfortunately for some of those SUV owners, this practice was and is against auto insurance laws. The police created a task force to deal with the problem.

They arranged a sting operation in which an officer working undercover would pose as an SUV owner trying to get a different vehicle.

The police actually installed a camera in the car to record the actions of the arsonist, and also rigged the vehicle with a kill switch and locks that would trap the arsonist inside.

These kinds of auto insurance fraud situations hurt everyone, not just the auto insurance companies. In part, they are responsible for higher premium rates and more. Enter your zip code in to get started putting your new cheap insurance tricks to good use! Compare

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