Insuring your car against damage and theft is a crucial part of protecting yourself financially. But if you're not careful, you can run into trouble before you've put your first 100 miles on the odometer.

The National Insurance Crime Bureau (NICB) reports that insurance fraud is the second-most costly form of white-collar crime in America, costing billions of dollars annually. For some policyholders, insurance can seem intimidating and complicated, and scammers see car insurance as an opportunity to make money from people's ignorance. Whether by lying outright or exaggerating the truth, a scam artist can con car owners and insurance companies out of thousands of dollars.

Fortunately, numerous organizations work to prevent and report insurance fraud. Educating yourself about how insurance scams work can make it hard for a criminal to target you.

Types of Insurance Fraud

An illustration of a young man trying to claim an existent dent as part of his rear-end accident when he is on the phone with his insurance agent.

Car insurance fraud can happen at any point from purchasing or selling your car to getting into an accident. Here are some types of car insurance fraud to be aware of so you don’t get scammed.

Soft Insurance Fraud

Soft insurance fraud means one of two things:

  1. **Intentionally exaggerate the damage of an otherwise legitimate auto claim. ** For example, you include a dent that already existed on your car as part of the damage or exaggerating injuries to increase injury and lost wages payout.

  2. **Provide false information to guarantee a lower premium or increase the chances of an auto application being accepted. ** For example, you decide not to include a high-risk driver in the household, such as a teen or senior driver, or provide a lower-cost location for the garaging address of the insured car(s).

Hard Insurance Fraud

Hard insurance fraud is much easier to detect than soft insurance fraud. It is an organized and deliberate act of staging a car accident, injury, arson or theft to scam the insurance company out of money.

An example of hard insurance fraud is someone purposely hitting the brakes in front of you, so you end up rear-ending them. Or you deliberately set fire to your car to claim the insurance money.

While some may say that soft and hard insurance fraud are victimless crimes, in reality, any fraud against an insurance company costs the consumer through increased future premiums.

Common Car Insurance Schemes

An illustration of a rear-end car accident. A young woman is looking at the front of her car while the young man is approaching her.

Soft or hard insurance fraud may be tough to distinguish whether you are speaking to an agent or on the road. Here's a primer on the main types of insurance fraud.

Agent Fraud

As soon as you buy your first car, you become a target for scams. If an insurance agent is corrupt, he can steal your money by failing to set up the insurance plan he promised you and keeping your payment instead. If you get into an accident, you'll have to pay the costs yourself.

Other agents sneak extra coverage you don't want into your policy. "Sliding," as this practice is called, can add hundreds of dollars per year to your payments, which lets the agent walk away with a higher commission.

"Scammers typically use fear (and) confusion and will pressure consumers to rush," noted a spokesperson from the National Association of Insurance Commissioners (NAIC) via email. "They won't invite you to shop around for the best deal or help you verify information using official sources. Remember, they may not be scamming for money alone. They may try to collect information like Social Security numbers and birthdays (that) they can later use to create credit card accounts."

First-time car buyers, like students, may be especially vulnerable to this kind of scam. Agents who are unethical may also target women, people with disabilities and others they believe will avoid confrontation.

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The best way to avoid agent fraud is to vet the agent carefully. Don't let anyone bully or rush you into signing an agreement before you're ready, and confirm your coverage through the insurance carrier. Research the best car insurance companies. Collect and compare several auto quotes from a select group of providers.

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Fake Injury Claims

Maybe you're in a rush one day, trying to run a few errands and get home. In a moment of distraction, you get into a fender bender in the parking lot. Then, days later, the other driver claims whiplash or other injuries.

Fake injury claims can increase your premium payments. According to the FBI, the average family may see an increase of $400 to $700 a year. Parents may be a target for this kind of scam since a criminal may see them as distracted and eager to resolve the situation.

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Report any car accident to the police, even if it's minor. It may be a hassle at the moment, but you'll be better protected if you have a police report to provide an official account of the scene.

Fraudulent Car Repairs

Most of us drive, but not everyone knows their way around under the hood of a car. Mechanics who are unethical take advantage of customers' lack of knowledge and charge top dollar to install substandard parts. Fraudulent car repairs can be costly and dangerous.

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Only take your car to a reputable mechanic. Check the Better Business Bureau website or your insurance company's recommended list to find a trustworthy body shop. You can also ask your family members or friends for recommendations.

Staged Accidents

Staged accidents are intricate schemes. Scammers will carefully choreograph an accident. Fake witnesses, doctors and legal advisors may provide phony testimony or advice. Their combined efforts make it difficult for the innocent driver to prove what really happened. Here's how some of the most common staged accident schemes work:

  • Swoop and Squat - The "squat" car drives in front of the victim. A second car cuts the "squat" car off suddenly, causing a rear-end collision when the victim can't brake in time, and "swoops" away after the crash. A third car may block the victim from changing lanes to avoid the collision. Without proof the "swoop" car was responsible for the crash, the blame falls on the victim.

  • Drive Down - The con artist waves the victim to turn or merge at an intersection. When the innocent motorist starts turning, the scammer will speed up enough to cause a crash. The scammer will then claim the victim appeared out of nowhere, or the scammer was swatting a fly.

    People may also encounter other versions of the drive down, such as the left turn and right turn drive downs. In a left turn drive down, the scammer is heading the other way, slows down and waves to the victim who is making a left turn to go ahead. Then the scammer will move forward to block the victim from turning and leave the victim in the middle of an intersection, causing an accident with another innocent motorist who slams into the side of the victim. The scammer may drive away and leave the victim to work out the details of the accident.

    In a right turn drive down, the scammer plans to rear-end the victim as the victim is turning right and claims there was no time to stop or traffic was unclear to make a turn.

  • Sideswipe - In some intersections, the borders of the inner and outer turn lane are unclear. The fraudster will occupy the outer lane then sideswipes the victim's car as they are turning. Because of the ambiguous lane division, the perpetrator claims the victim caused the accident.

  • Panic Stop - A team of con artists fills one car, and they slam on the brakes in front of the victim — sometimes when the victim is distracted while driving. The passengers in the criminal car claim phony or exaggerated injuries. Since it's a rear-end collision, the victim is still considered at fault. The NICB reports that some criminals even purposely hit or cut themselves before running a staged collision scam.

Captain Tom Didone, Director of Traffic for the Montgomery County Police Department in Maryland, said it could be difficult for officers to distinguish a staged accident from a natural one.

"Every time we go to an accident," he said. "There are usually several perspectives that are in conflict. Unless there was a witness, I think it would be difficult for an officer to decide (who's telling the truth)."

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Collecting as much information as possible at the scene of the accident can help you win your case.

The Bad Samaritan

If you get in an accident, beware of people who approach while you're waiting for the police to arrive and file a report. These "helpers" might be predators.

Scammers pretend to be lawyers, doctors or third-party insurance agents or consultants. They try to get your personal information so they can file fake insurance claims on your policy. Numerous false claims can lead to raised premiums or even loss of insurance coverage for you.

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Over-eagerness to help could be a red flag for such scams. Watch out for people who try to convince you to take an ambulance when you're not hurt, attempt to draw you away from the police or ask a lot of personal questions, mostly about insurance.

How to Protect Yourself Against Car Insurance Scams

Fortunately, you can protect yourself against scams by taking some easy precautions. The NICB offers the following advice:


Drive carefully

As you drive carefully, make sure you keep a reasonable distance between yourself and other cars. Tailgating limits your ability to react in time to prevent a crash.


Request an official report

If you get in an accident, even a mild fender bender, call the police and request an official report with the officer's name. An official report makes it difficult for scammers to damage their car after the accident occurs and file a larger claim.


Take plenty of notes and pictures

Get pictures of any damage to the cars and photos that show the angle of the accident if you can. Try to take photos of the other people involved in the accident.


Be careful of unsolicited tow truck drivers

Watch out for "friendly" tow truck drivers who stop at the accident scene before you've called for help. Some drivers who are deceitful may tow your car at an inflated rate. Call AAA or another reputable service if you need your car towed.


Keep a cautious eye on 'helpful' bystanders

Be wary of bystanders who show up quickly and try to convince you to contact a particular lawyer, insurance agent or doctor.


Alert your insurance company

If you suspect you are the target of an insurance scam, tell your insurance company and the officer who arrives at the scene.


Report the scam

Report suspected scams to the National Insurance Crime Bureau (NICB).

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It may be a good investment to purchase a dash cam to help document accidents. Depending on the type of dash cam, what features you want and how many you purchase, it can range from $50 to $260, based on Amazon prices. The highest-priced cameras have several lenses to capture footage from the front, back and inside of your vehicle and may have a night-vision feature.

At-Risk Groups

Certain demographic groups may be targeted more often for scams because criminals think certain people are easier to intimidate. Scammers and con artists also target people who may help them obtain more money. These higher-risk targets include women, seniors, drivers operating work vehicles or big rigs and luxury car drivers.

Being part of one or more of these groups doesn't necessarily mean you'll be victimized or that you are an easier target than anyone else. Staying vigilant and taking recommended actions to protect yourself can keep a scam attempt from succeeding.

What to Do if You Become a Victim of a Scam

** Car insurance scams** can be incredibly stressful. If your vehicle is totaled or you discover after an accident that your insurance policy is phony, your mobility and finances can take a hit.

Alert Your Insurance Agent

James Quiggle, director of communications for the Coalition Against Insurance Fraud, urges people to report suspected fraud.

"Share your concerns with your insurance company and with your state insurance department. They may launch an investigation if you have compelling evidence," he said, such as $80,000 in claimed medical bills from a 2-mph fender bender in a parking lot.

Alerting your insurance company representatives to your suspicions is important. They are the ones who will help cover your damages, so the sooner they understand what happened, the sooner they can work to resolve the problem. Ask the representative what your options are for getting reimbursement for a rental car if you need one or replacing expensive safety equipment like infant car seats.

Document Everything

Collect detailed records to confirm your account of what happened. Set up a filing drawer in your home to store important information about your car. Keep the following records in a safe place:

  • Your insurance policy
  • Premium payment records
  • Copies of estimates and bills from mechanics
  • Notes and photos from the scene of an accident involving your car
  • A copy of an accident report from a police officer, if you can get one

Whether you're concerned about an insurance agent, mechanic or accident, your records may determine your ability to prove unethical or criminal behavior.

Report the Scam

The NAIC and the NICB, among other organizations, also collect reports of fraud. Check out the resource list at the end of this article to learn more about reporting a scam.

Depending on the damages you've suffered and your documentation of the scam, you may be able to pursue legal action against the scam artist. However, before you rush to file a lawsuit, talk to a lawyer about whether your chance of success is worth the time and effort.

"The standard is the preponderance of evidence beyond a reasonable doubt. If you are in a crash and people are injured, and you don't have coverage (due to agent fraud), you may have grounds for a civil suit," Quiggle said. "A lawyer can advise you on whether a lawsuit makes sense."

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Frequently Asked Questions About Car Insurance Fraud

With car insurance scams, some common questions that come up. Here are the answers to some of the most common questions asked about car insurance frauds.

Expert Advice on Protecting Yourself Against Insurance Fraud

Spotting and avoiding insurance scams can save you money as well as help you keep peace of mind. Our experts talked to MoneyGeek about the best anti-scam strategies.

  1. What are the most common car insurance scams that people should be aware of?
  2. Are there any groups that are targeted more often for car insurance scams?
  3. How can I avoid becoming the victim of a scam?
Mary-Jo Kranacher
Mary-Jo Kranacher

ACFE Endowed Professor of Fraud Examination at York College

Chad Marzen
Chad Marzen

American General Insurance Associate Professor of Insurance Law at Florida State University

James Quiggle
James Quiggle

Director of Communications at Coalition Against Insurance Fraud

Resources on Car Insurance Fraud

There are many resources available to help with understanding and reporting car insurance scams and fraud. These anti-fraud agencies, programs and resources are available in your state and nationwide. Some of the links below will take you to state-specific resources you can use to learn more or report insurance fraud.

Local or State Resources

National Resources

  • Federal Bureau of Investigation (FBI): Suspicious activities, including financial crimes like car insurance fraud, can be reported to your local FBI office for investigation.
  • National Insurance Crime Bureau: NICB provides valuable information on insurance crimes and video illustrations of how the most common stage accidents are performed. You can report fraud through this nonprofit organization's website.
  • International Association of Auto Theft Investigators: The IAATI’s mission is to combine international resources to combat auto theft. This organization consists of professional auto theft investigators and law enforcement representatives.
  • Anti-Fraud Alliance: The AFA represents law enforcement and the private industry to provide training, networking and collaboration among all levels to combat insurance fraud.
  • Created by the National Consumers League, this website provides tips for consumers to avoid being scammed and resources to use if you think you have been.
  • Coalition Against Insurance Fraud: This organization collects information on insurance fraud, works to pass anti-fraud laws and educates the public on how to spot and report scam attempts.
  • United States Department of Justice: You can find additional information about financial fraud crimes and what you will need to have if you pursue a lawsuit.
  • Counsel Hound: Attorney-managed consultation service that connects people with lawyers to match their specific legal case.

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About Jessica Sillers

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Mandy Sleight is a writer for MoneyGeek and has been an insurance agent since 2005. As a freelance writer, she uses her vast knowledge of the insurance industry to create informative, engaging and easy-to-understand content for consumers. Her work has been featured in Market Watch, Kiplinger and other major publications.

Jessica Sillers writes about finance, business, travel and parenting for various businesses and publications. She lives with her family in the greater Washington, D.C. area. Learn more about her work at