5 Examples Of Car Insurance Fraud That You Must Know
It is important to be familiar with the type of car insurance fraud and road scams so that you know what to do when facing such situations. Read below to find out some common examples of car insurance fraud in Malaysia.
We’ve seen the news and social media postings where victims share their experience encountering car insurance fraud and road scams. You may even have friends or family members who have faced fraudsters — those who want to cheat the system and make money from such false claims.
Although most of us have car insurance, we may not understand the underlying rules and conditions that the insurers put into the policy. This situation allows fraudsters to take advantage of our lack of knowledge and use it to make illegal profit through trickery.
Some cases of car insurance fraud may be difficult to spot and you could be committing them without realising it. In this article, we share with you some examples of car insurance fraud and road scams in Malaysia, how you can watch out for them and, most importantly, not becoming a victim.
What is car insurance fraud?
Motor or auto insurance fraud is when someone makes a fraudulent insurance claim in return for payment. It involves filing false or exaggerated claims involving vehicle damage or personal injuries following an accident.
There are two main categories of auto insurance fraud:
- Hard insurance fraud: Creating a fake situation to file for an insurance claim. A common example is when someone stages a car accident.
- Soft insurance fraud: Exaggerating the damages or expenses involved in car insurance claims. A common example is when someone makes unnecessary repairs at the workshop with the goal of charging the insurer a higher bill.
Six types of car insurance fraud and road scams
Here’s a list of car insurance fraud and road scams, and what to do if you fall prey to the situation:
1. Tow truck scams
If your car broke down on the side of the road, do not allow a towing company to take your car unless you called them.
A tow truck scam is considered to be the most common road scam in Malaysia. The scammers would usually leave debris, oil, metal nails or glass shards on the road and wait for any potential victims to fall into the trap — those who fall for this trap would lose control of their vehicle and get into an accident.
If you’re involved in this type of situation, a tow truck will suddenly appear to assist you just minutes after the accident. They would offer to provide towing service at a ridiculous price that could cost you up to thousands of ringgit. The scammers would try to persuade and pressure you to use their towing service, especially when your car is obstructing the road.
An even worse scenario to be in is when you don’t have another option, and are forced to agree with their offer. They would secretly tow your car to their own workshop instead of the police station or the panel workshop approved by your insurance company. Once you’ve reached this far, they would take advantage of the situation and force you to pay another sum of money for your car to be released.
2. Staged or fake accidents
Fake car accidents are set up by fraudsters who are looking to commit car insurance fraud or file a fraudulent personal injury claim.
Staged or fake accidents can happen while you’re driving, reversing or parking your car.
For example, the scammer will suddenly appear in their car behind you while you’re reversing, making it look like you crashed into them. Your car only bears little to no damage while the scammer’s car would appear to be in a bad condition. They will blame you for the damage and pressure you to go to the police station, in which the scammer allegedly has a secret connection with the policemen in charge and forces you to pay for summons. The scammer will also then try to force you to pay for the damage repair through an insurance policy.
3. Emergency brake scams
Emergency break scammers would taunt you by speeding up their car and then slam on their brakes several times until you hit them.
Similar to the above situation; the scammer will purposely speed up their car and slam on their brakes numerous times until you hit the back of their car. If you didn’t know, in most cases, whoever hits a vehicle from the back will always be at fault. However, you may not be entirely at fault for the collision if you have witnesses or proofs of what actually happened. The scammers do this to extort money from victims for repair and medical costs.
4. Overstating the claim amount
Overstating or exaggerating an insurance claim is a crime.
After you’ve been involved in an accident, you would want to claim the amount of loss from your insurance company. Dishonest policyholders may take the opportunity to incorporate damage costs that are not from the accident. This would lead to higher costs reported in the bill for repairs than what was actually paid.
Although you could convince the mechanic to work with you on this illegal mission, exaggerating the amount of loss in your car insurance claim is considered insurance fraud. If you’re found guilty, you will be charged with a higher insurance premium in the future.
5. Claiming under another driver’s name
You will have to bear a compulsory excess of RM400 when making a claim if your car was being driven by someone who is not named in your insurance policy.
If your car was involved in an accident while it was being driven by your cousin (who is not registered as Named Driver in your insurance policy), you will have to bear a compulsory excess of RM400 when making a claim.
Wanting to avoid that exorbitant additional fee, you decide to list your name as the responsible driver in your claim. If you’re caught faking the driver’s identity, your policy may be cancelled and legal actions can be taken against you for filing fraudulent claims.