How to Protect Yourself From Insurance Fraud
What is insurance fraud?
Your homeowners insurance policy is a binding legal contract. It clearly outlines your rights and responsibilities, as well as those of your insurance company. Take time to review your policy and make sure you understand what is and is not covered. If you have any questions about your coverage or how your policy works, contact your local insurance agent for clarification.
Insurance fraud occurs when an individual or group knowingly seeks to obtain money or other benefits from an insurance transaction through deception which violates the insurance contract. Activities such as intentionally causing an auto accident or exaggerating or falsifying a loss or damage to property are common examples of insurance fraud and can affect individuals either as a victim or an unwitting participant. Insurance fraud can be dangerous not only to innocent bystanders but also to the person committing the fraud. It also contributes to higher insurance premiums for all policyholders. When people file false insurance claims, they are stealing not only from their insurance companies but from their friends and neighbors as well.
Insurance fraud in Virginia
According to The Virginia State Police Insurance Fraud Program, Stamp Out Fraud (opens in a new window), fraudulent insurance claims in Virginia exceed $20 million each year, and millions more in fraudulent claims are attempted. Insurance fraud is estimated to add as much as $1,000 to the cost of goods and services and is costing the average Virginia family $1,000 each year.
Types of insurance fraud
Home and renters insurance fraud
This type of property fraud occurs when a policyholder intentionally overstates or fabricates a loss or damage to their home or personal property in order to receive payment they are not entitled to. This may include activities such as arson, fake burglary, or falsely reporting pre-existing damage.
Casualty insurance fraud
Casualty fraud involves intentionally misleading an insurance company to obtain liability coverage payment for accidents, injuries, or property damage by staging or exaggerating a claim. Examples include faking or overstating an injury after an alleged slip-and-fall in a store or other place of business or misrepresenting incidents to get payouts for things not covered or for more than the actual loss.
Vehicle insurance fraud
Insurance fraud using vehicles is the most common type of fraud in Virginia. Taking the form of property or casualty fraud, it can involve a person damaging their own vehicle, scammers staging a crash, and making false claims about car accidents or accident-related injuries. It can even involve mechanics overcharging for or lying about repairs for financial gain.
Penalties for insurance fraud in Virginia
If you knowingly deceive an insurance company in order to obtain money or other benefits, you may be charged with insurance fraud. When the value involved is less than $1,000, the offense is a Class 1 misdemeanor, punishable by up to 12 months in jail, a fine of up to $2,500, or both. When the value is $1,000 or more, the offense is a Class 4 felony, which can carry a prison sentence of up to 20 years, a fine of up to $2,500, or both imprisonment and a fine.
How to avoid insurance fraud
Be honest when you file an insurance claim.
Taking careful, honest steps when you file an insurance claim can help you avoid the serious legal and financial consequences of insurance fraud. It can be tempting to stretch the truth when filing a homeowners insurance claim, especially after a stressful event like a hurricane. However, even seemingly small exaggerations can lead to serious legal and financial consequences. When reporting a loss, accurately document the value of any damaged or stolen items and only include damages that directly resulted from the specific incident you are reporting. If an injury results in an insurance claim, do not fake or exaggerate an injury or accident.
Avoid fraud when hiring someone to repair your home or car.
Avoid using door-to-door solicitors or "storm chasers," especially after a major weather event causes heavy property damage in a concentrated area. Homeowners may be shaken and vulnerable and in need of urgent repairs. Some of these contractors may not be reputable. They might pressure you for payment upfront and then fail to complete the work, or they may perform substandard repairs that create more serious problems in the future. This is especially common in the home roofing repair industry because damage may be difficult for you to see and a roof is a big-ticket item to replace.
Tips for hiring home repair contractors
- Make sure that the work is covered by your policy, and don't ever pay a contractor in full before work is completed. A partial deposit is usually expected.
- Find contractors that can provide references, are licensed and insured, and get more than one written estimate for repairs.
- Beware of contractors offering to waive your deductible (illegal), make up damage claims, or inflate the claim amount.
- Look for local reviews and ask for references from past jobs.
- Ensure all terms, materials, warranties, and costs are detailed in a contract.
- Carefully read any documents before signing. If you’re unsure, consult your NNINS claims adjuster, your insurance agent, or a legal expert to review it first.
Tips for working with car repair shops
Some dishonest collision repair shops may include charges for work they never intend to complete or for parts that will never be installed. They may also inflate an estimate by overstating the extent of the damage to the vehicle.
- Beware of repair shops offering to cover your insurance deductible or hide the cost within the estimate for repairs so the insurance company ends up paying the deductible.
- Ask for a written, itemized estimate for repairs and check the bill carefully. Ask the shop to keep and show you the parts that were replaced.
- Use extra caution if someone approaches you unexpectedly and offers to repair your windshield or other glass on your vehicle. An uninvited “inspection” from a glass repair “technician” can sometimes be the first step in an insurance fraud scheme.
- Use reputable collision repair shops that employ ASE-certified (opens in a new window) (Automotive Service Excellence) body technicians.
- Ask your insurance company, a trusted family member, or a friend to recommend a reputable repair shop.
- Get a written warranty on installed collision repair parts and paint work.
Avoid fraud while driving or repairing your car.
To avoid becoming a victim of auto insurance fraud, be careful not to tailgate—following too closely could set you up for a staged accident. What you do immediately following a car accident is extremely important too.
Here are a few more precautions to avoid a car insurance scam:
- Consider installing a dash cam in your car to record incidents.
- Always call police following a car accident and get a report.
- In the event of an accident, carefully document the scene by taking photos of all damages and road conditions, and record the license plate numbers and identities of everyone involved.
- If you are injured in an auto accident, use caution with anyone who approaches you unsolicited and offers to refer you to a specific doctor or attorney.
- Have vehicle repairs completed by a reputable repair shop, and ask the manager to identify all replacement parts and show you the parts that were removed.
- Obtain a detailed, written estimate that itemizes all repair work and parts, and review the invoice thoroughly before paying.
How to report insurance fraud
Driving down fraud by reporting what you see or hear reduces annual premium rates for policyholders everywhere and protects others from falling victim to the same schemes. If you suspect insurance fraud, it's important to tell authorities like the Virginia State Police Insurance Fraud Program or the National Insurance Crime Bureau (NICB) (opens in a new window). You can even remain anonymous and report a tip (opens in a new window). You can also report suspected fraud to your insurance carrier or insurance agent.
Resources:
https://stampoutfraud.com/annual-reports/
https://law.lis.virginia.gov/vacodefull/title18.2/chapter6/
THE NORTHERN NECK INSURANCE INTEGRITY PROMISE — We pledge to provide straight talk and good counsel from our NNINS Virginia insurance experts through our blog. While we hope you find this to be a helpful source of information, it does not replace the guidance of a licensed insurance professional, nor does it modify the terms of your Northern Neck Insurance policy in any way. All insurance products are governed by the terms in the applicable insurance policy.
