How to Handle an Auto Insurance Fraud Investigation

When you have a car insurance fraud investigation, you must get competent legal advice and gather all necessary documentation to prove otherwise. You are considered innocent until proven guilty.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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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: Jan 22, 2021

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Here's what you need to know...

  • If you’re accused of insurance fraud, the first thing you need to do is contact an attorney
  • Consumers have the right to sue an auto insurance company that has denied their claim
  • Insurance fraud costs the average American household approximately $980 dollars each year

According to the London Telegraph newspaper, the first thing to do if you’re accused of insurance fraud is, don’t panic!

Those who are accused of a crime or are sought out for testimony in an ongoing investigation may wrongfully incriminate themselves by appearing nervous or ill at ease during an inquiry.

In a recently published article, the Telegraph reminds readers that insurance companies must be able to prove their accusations of fraud before any legal remedies are pursued.

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Get Competent Legal Advice

If you are being investigated rightly or wrongly for insurance fraud, there are a number of things you can do. First, consult with an attorney.

Do not grant an interview or provide any information to police or any other officials without having a legal representative present at the time of the interview.

In many cases, individuals under insurance fraud investigations will wait too long to consult with an attorney in order to avoid expensive legal fees.

Remember, a few hundred dollars for legal consultation up front can avoid far most costly results down the line if charges are brought against you. As the old saying goes, “An ounce of prevention is worth a pound of cure.”

For more information about securing legal counsel in auto insurance fraud cases, check on-line resources at AVVO.com, a website providing consumers with expert legal advice on a number of topics.

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Proof Positive

In order to prove a fraudulent act has been committed, insurance companies must have some concrete evidence of one of the following: proof of lies or deceptive acts or evidence of statements that are inconsistent with the facts of a case.

As with all legal cases in the United States, a suspect in a case of insurance fraud must be considered innocent until a court of law and a jury of his or her peers is able to determine guilt beyond a reasonable doubt.

If your insurance provider suspects that you have filed a fraudulent claim, they should give you an opportunity to respond to their concerns.

If an insurance company reject your claim, you may file a complaint with your state’s insurance commissioner. Consumers whose auto insurance claims have been rejected or denied have the right to pursue the matter in a court of law.

In Great Britain, those with rejected claims or other insurance complaints may bring the matter to the FOS, Financial Ombudsman Service. Like their counterparts in the United States, the FOS protects consumers from the often arbitrary and sometimes erroneous decisions of insurance providers.

Honest Mistakes

When filing an insurance report, consumers may not recall all of the details of the accident. Items that had been lost, stolen, or damaged may be momentarily forgotten at the time a report is filed.

It’s also very common to misplace original paperwork and in many cases, insurance claims must be amended or updated at a later date.

Again, just because the insured party is not able to immediately provide all the details and supporting evidence at the time a claim is filed, does not suggest that the claim is unfounded or fraudulent.

Auto Insurance Fraud is Costly

In Great Britain, insurance companies uncover 330 cases of insurance fraud each day. Phony auto insurance claims represent a full third of all insurance fraud in Great Britain.

Experts estimate that car insurance fraud in the UK adds the equivalent of $67 a year to the average family’s insurance policy. In the United States, the situation is much worse. Losses due to insurance fraud amount to more than $80 billion each year.

Broken down, insurance fraud costs each American household $980 per year. That’s a lot of extra money for the average American family to pay because of someone else’s lies and deceptions.

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Insurance Fraud, a Crime We All Pay For

According to the CAIF, Coalition Against Insurance Fraud, the $80 billion price tag mentioned above is something that all Americans pay for in many different ways.

Insurance fraud knows no boundaries. In many cases, the lives of hardworking, honest American citizens may be financially damaged or perhaps ruined by insurance scams.

People can lose their life savings by investing in fraudulent insurance schemes. Older citizens are especially vulnerable to this type of criminal activity.

Next to housing, food, and transportation, families spend more for insurance services than for any other commodity and, because of insurance fraud, annual premiums keep rising.

All consumer prices rise as a direct result of the effects of insurance fraud on the American economy. Honest, legitimate business owners lose money and employees suddenly find themselves without jobs.

Cause and Effect

According to a recent article published by USA Today, it’s estimated that one in seven motorists drive without automobile insurance.

Excluding New Hampshire, it’s illegal to drive without some form of coverage. Almost 14 percent of drivers get behind the wheel each day with no liability insurance.

Uninsured motorists place a heavy financial burden on the rest of the nation. The price tag was a whopping $10.8 billion in 2007 according to the National Association of Insurance Commissioners.

Mississippi has the highest percentage of drivers without proper coverage at 28 percent, followed by New Mexico with 26 percent, then by Florida, Tennessee, and Oklahoma at 24 percent.

Auto insurance fraud is big business and still growing. If the annual costs of insurance fraud were compared with the largest American corporations and businesses, insurance fraud would rank at number 17 of the top industries in the nation!

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