Consumer Tips In The Fight Against
Auto Insurance Fraud
NEW JERSEY – As part of Insurance Fraud Awareness Month, New Jersey Department of Banking and Insurance Commissioner Ken Kobylowski cautioned New Jersey consumers to be on the lookout and be aware of auto insurance fraud hazards and pitfalls. Auto insurance fraud takes many forms, such as filing a false claim for damage and injuries in order to obtain compensation, to which a person is not entitled, failing to list all drivers of a vehicle, lying about a place of residence and claiming commercial or business use vehicles as private passenger autos.
Simply misrepresenting any material fact on an application in order to lower premiums also constitutes insurance fraud in New Jersey. Every year, the State charges hundreds of people in New Jersey with insurance fraud.
“Auto insurance fraud is a crime that has a very real and serious impact on what New Jerseyans pay in annual premiums,” said Commissioner Kobylowski. “When people commit auto insurance fraud it costs all New Jersey drivers.”
Nationally, auto insurance fraud adds $200-$300 a year to individual insurance premiums, according to estimates from the National Insurance Crime Bureau.
A significant benefit to New Jersey automobile insurance consumers is the generous medical coverage called Personal Injury Protection (PIP) for drivers and passengers injured in a motor vehicle accident. Most citizens in the State have benefits of up to $250,000 per accident which is much higher than most other states that limit similar coverage to $5,000 – $10,000. While this is good news for times when people are seriously injured in an auto accident, this high benefit level can often be targeted by unscrupulous individuals, professionals and organized groups who seek to bilk the otherwise legitimate system for personal gain. Insured individuals should be very cautious of situations when anyone approaches them after an accident and recommends “free” medical and legal advice along with the promise of financial compensation. Anyone injured in an accident is free to consult medical and legal professionals of their choice.
New Jersey drivers should be wary of becoming targets of fraud rings. Things that consumers should be on the look-out for that could signal insurance fraud include:
PIP Benefit Fraud – Deceiving insurers while filing PIP claims for financial gain. Examples include:
- Medical services billed but not provided;
- Unnecessary and sometimes risky medical services performed by the medical provider for personal financial gain; and
- Billing for more expensive procedures than were actually done.
Drive-Down – A driver motions another driver to proceed and then intentionally collides with the passing vehicle.
Hit and Run – A person claims to be an accident victim using a car with old damage caused by a phantom vehicle.
Sideswipe – A driver in the inside lane of a dual left-turn lane at a busy intersection intentionally swerves into the outer lane and causes a collision.
Swoop and Squat – This is a scam involving a car that quickly passes a second vehicle, then moves directly in front of it where it stops abruptly, causing the second or “squat” car to also stop without warning. A resulting rear end collision occurs between the victim and the second car.
Phony Injury Claims – Criminals lie about trauma sustained in an accident. This may include faking a permanent disabling back injury while continuing to engage in normal activities or substituting false medical reports to an insurer.
Jump-Ins – People claim to have been in a vehicle when they were not there at the time of the accident. Individual insured drivers and passengers can also be guilty of committing insurance fraud. While one may think these are harmless offenses, they are criminal offenses. Examples include:
Claim Fraud – Any omission or misrepresentation during an auto insurance property damage or injury claim filing that results in a higher amount paid. Types of claim fraud vary, but include these examples:
- Arson for Profit –A vehicle is intentionally set on fire by the owner or someone acting on behalf of the owner to collect insurance money;
- Exaggerated Claim – Inflating the amount of a loss such as an injury or the value of an item damaged or stolen;
- Deductible Fraud – A medical provider or auto repair facility pays the insured a deductible in exchange for business or other financial gain; and
- Fictitious Invoices – Providing exaggerated or false invoices to support a concocted claim.
Application Fraud –When a person knowingly omits or misrepresents information in the application for auto insurance coverage to gain a less expensive premium quote. Types of application fraud also vary. Examples include:
- Omitting Regular Drivers in an application or renewal questionnaire, usually to illicit lower premiums by not reporting younger or more risky drivers;
- Garaging a vehicle primarily at a more risky location other than that which was stated on the application or renewal; and
- Misrepresenting the actual intended use of a vehicle whether for commercial or personal use.
Simultaneous Application and Claim Fraud – There are times when both types of fraud come into play. For instance, when a person applies for insurance shortly after an accident, claiming the incident happened after the insurance policy’s effective date.
One way consumers can fight fraud and avoid being a victim is to know exactly what to do if an accident happens. In the event of an auto accident, the National Association of Insurance Commissioners (NAIC) has made available WRECKCHECK, a free app available on Android and iPhone operating systems that walks accident victims through the process of gathering pertinent information immediately after an accident. It is also important to know what information not to share, such as details that include a home address and phone number which could lead to identity theft.
WRECKCHECK can be found forAndroid here: https://play.google.com/store/apps/details?id=org.naic.android.wreckcheck&hl=en
And for iPhone here: https://itunes.apple.com/us/app/wreckcheck/id543290503?mt=8
A conviction for auto insurance fraud can mean jail time and fines. Criminal cases are pursued by the Office of Insurance Fraud Prosecutor while the Bureau of Fraud Deterrence pursues civil cases. New Jersey insurance consumers can review the Bureau’s new enforcement web page to gain a better understanding of real insurance fraud examples and their financial consequences. The link can be found here: http://www.state.nj.us/dobi/division_insurance/bfd/enforcement.htm.
Anyone who believes they have been a victim of insurance fraud or who has information about an individual or entity that may be in violation of the law should call 1-877-55-FRAUD or e-mail NJInsuranceFraud@njdcj.org<mailto:NJInsuranceFraud@njdcj.org>.
For more information from the New Jersey Department of Banking and Insurance, call 1-800-446-7467 or go online to: www.dobi.nj.gov