5 Most Common Insurance Frauds and How to Prevent or Detect Them

Common Insurance Frauds

Frauds are everywhere around us, with insurance scams being very popular. Con artists can be very persuasive and charismatic, making it difficult to detect their fraudulent nature.

Becoming aware of different common insurance scams will help you avoid falling victim to them. Therefore, here is a list of the five most common insurance frauds with advice on how to prevent or detect them.

The COVID-19 Phishing Scam

Phishing emails have been a go-to scam for many swindlers for quite a while. However, in the wake of the global pandemic, some tricksters decided to use the opportunity to conduct COVID-19 insurance policy scams via email. The email usually contains info about a COVID-19 insurance policy that you didn’t buy and they ask for your personal information. 

Along with that, sometimes there are links, and if you click on them you will download a harmful virus on your computer. The best way to prevent them is by not disclosing any personal information and avoiding clicking on links sent by unknown email addresses. 

The Social Media Ghost-Broking Scam

insurance brokers

Ghost brokers are con artists who pose as legitimate insurance brokers and try to sell false car insurance. The newest version of this scam takes place on social media.

They carry out this scheme by purchasing genuine insurance policies and then use them to create fraudulent policies that they then sell to customers. It’s highly advisable to thoroughly research the broker online before deciding to become their customer. 

The Staged Collision Scam

The staged collision scam is one of the more difficult ones to detect and prevent. It involves a car accident that the fraudsters make seem as if it was your fault. There are quite a few variations of this scam. One variation involves a left-hand turn. It goes down like this. As the unsuspecting victim is preparing to make a left and waiting for the oncoming traffic to pass, one car comes to a halt and signals to the target to pass. 

As the target starts moving, the scammer drives forward forcing them to break. Then the scammer drives away, while their associate slams into the side of the victim’s car. Since the victim was technically blocking the way, they are likely to be deemed at fault, and the scammers get paid by the victim’s insurance. Therefore, you should beware of cars that let you pass when it’s not your turn.   

Junk Insurance

While the first two insurance frauds have to do with you being approached by a con artist, not all frauds work like that. You may seek out a regular financial institution to get a loan and get sold junk insurance.

You’re probably wondering what is junk insurance precisely? The term junk insurance refers to add-on insurance that has no worth to the customer. The customer gets talked into getting a premium policy that they have no use for, along with their loan. Sometimes, the buyer of such insurance cover may not even be aware that they are paying for such a policy. 

It is not only the financial institutions such as banks that do this. Some car dealers may offer junk insurance as well. To prevent paying for such worthless coverage, you need to make sure that you read every inch of any document that you’re signing, including the fine print, and ask as many questions as you need to.

The Roof Repair Scam

Knowing how to choose adequate commercial insurance is the essential first step not to get tricked while getting insurance. However, you may also become a victim of insurance fraud without even seeking out to get an insurance policy.

Some vile thieves are always looking for creative ways to hustle their unsuspecting marks, even during devastating events, such as severe damages to homes during a thunderstorm. These con artists may impersonate helpful contractors who are offering to repair the roof. A tell-tale sign that they aren’t an actual contractor is if they rush you to pay immediately or sign a contract. 

They will either do a very poor job of repairing your roof or not show up to do the work at all. In the former case, they might even do more damage to collect a larger sum of your homeowner insurance claim.

The way you can prevent getting swindled is by not accepting any deal immediately, but rather taking your time to research the contractor. It’s also wise to avoid cash payments, as then you have no paper trail of where the money went.

avoid cash payments

Wrapping up

As you’ve seen, these sneaky swindlers can be extremely persuasive and will try anything to get ahold of your hard-earned cash.

Be wary of any deals in case an individual approaches you first and always double-check the information on any individual or company before giving them money.

Written by Mike Johnston


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