How does a car insurance company investigate claims?

Insurers devote many resources to uncovering fraudulent claims. Car insurance fraud is punishable by up to 5 years in prison and a $50,000 fine.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's what you need to know...

  • Fraud is a growing problem in the United States
  • Car Insurance companies actively investigate claims that seem suspicious
  • Fraud costs drivers money through higher premiums and dangerous situations

Insurance companies are always on the lookout for fraudulent claims. Fraud leads to higher payouts, and that can result in rising premiums for everyone else that the company insures.

There are several steps that adjusters take to spot a phony claim and help people keep their rates down.

When you search around for a company that does due diligence in regards to investigations, you may find lower rates that will fit nicely in your budget.

The best way to find lower rates is to compare auto policies. Start today by entering your ZIP code into our FREE tool above!

A Growing Problem

Fraud is a growing problem. According to the Insurance Information Institute, property and casualty insurance fraud costs the industry roughly $32 billion a year.

It’s also led to the rise of special fraud bureaus in 42 states and the District of Columbia.

These agencies respond to tips, investigate cases, and follow through with criminal charges, convictions, and court-ordered restitution.

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Looking at Historical Trends

One of the first things your company will look at is your claims history. If you’ve been a member for eight years and have never filed a claim, then they may not look too closely at your first one.

However, they’re going to look very hard at someone who files a claim once a year.

The insurance adjusters keep a close eye out for:

  • Common fraudulent claims, such as missing cars
  • Claims that are out of the norm for typical patterns in the area
  • Claimants who seem too calm
  • People who increased their coverage levels shortly before filing a claim

When you start shopping around for coverage, you can also expect a company to take a look at your past claims history.

If you have a clear pattern of filing claims, it may be more difficult to find the quality coverage you’re looking for. However, people with a history of minimal claims can typically find more attractive rates.

In-House Investigations

Keeping an eye out for fraud goes beyond the initial visit from your adjustor.

Some insurance companies go so far as to check up on social media accounts to see what a person is doing in the days and weeks following an accident.

It only takes a few minutes for the adjuster to check on your Facebook or Twitter account.

They can use the information to determine if you:

  • Have been honest in your communications with the company
  • Engage in activities that your claimed injuries would usually prevent
  • Are known for being a poor driver

Investigators and the Law

It’s also not unheard for an insurance company to hire a private investigator if they believe that a large claim is fraudulent.

These people can troll through social media sites and conduct in-depth investigations to determine if the information being provided is accurate.

However, they do have some limitations imposed on them by the courts.

They’re legally prevented from:

  • Climbing trees to take pictures or filming over privacy fences
  • Lying about their identity or approaching the claimant through any pretext
  • Harassing the claimant through hard following
  • Trespassing onto private property

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The Definition of Fraud

It’s important to know how the insurance industry defines fraud so that you can stay on the right side of the law.

There are several activities people engage in believing that they won’t cause any harm, but they’re illegal.

You could be guilty of committing fraud if you:

  • Misrepresent how an accident occurred
  • Lie about the dates that an accident or event happened
  • Make a claim for a higher amount than the actual damages

There are also two different types of fraud. Soft fraud is when a claim holder exaggerates information or lies about the circumstances, and it’s extremely common.

Hard fraud is less common. It’s when someone deliberately damages or disposes of their property to file a claim.

Both types can lead to an increase in rates, a loss of coverage, and even criminal charges.

The Larger Impact

Insurance fraud has a larger impact on society than you might initially think.

The people committing fraud often believe that it’s coming from a faceless organization with plenty of money in the bank, but the fact is that the true cost is passed on to the consumer.

Experts warn that insurance fraud results in:

  • Slower processing of legitimate claims
  • A rise in premiums
  • Dangerous situations for innocent victims

It may seem like fraud is harmless, but the fact is that innocent people can be hurt through staged accidents, repair shops that use counterfeit air bags to save money and defective windshield replacements.

When shopping for auto insurance, look for a company that will pay for original factory equipment and will allow you to choose your repair shop.

Most insurance companies look out for their clients by keeping a close eye on claims and trying to expose the fraudulent ones.

While it may be difficult to stamp out fraud completely, insurance companies are still working diligently to protect their clients from the dangers associated with these claims.

However, you don’t want your claims to be delayed too long because of the fraudulent actions of other people. When shopping around for coverage, look at the customer service ratings of different companies to see how well they handle claims.

Researching car insurance can be difficult, but it doesn’t have to be. Enter your ZIP code into our FREE tool to get started!

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