15 Common Car Insurance Scams You Need to Look Out for

Look out for these common types of car insurance fraud and avoid getting taken for a ride.

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Updated May 28, 2024
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Auto insurance fraud hurts everyone, from insurance companies to policyholders. The Coalition Against Insurance Fraud (CAIF) estimates that insurance fraud costs U.S. consumers over $80 billion every year. That cost trickles down to insurance rate increases between $400 and $700 per year for the average family.

According to the National Insurance Crime Bureau (NICB), about 10% or more of insurance claims are fraudulent. The NICB calls insurance fraud schemes the second most costly white-collar crime in America after tax evasion, with billions of false claims filed yearly.

From a staged car accident and fake injury claim to repair shop and insurance agent fraud, here are some common auto insurance scams to look out for.

What is car insurance fraud?

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Car insurance fraud is when someone deliberately attempts to deceive an insurance company or agent for financial gain. The deception can be committed by criminals, unscrupulous insurance agents or repair shops, and even by policyholders themselves.

Car insurance fraud is a crime that is punishable by hefty fines for misdemeanors and even jail time for felonies. There are two types of car insurance fraud: Hard fraud and soft fraud.

Hard fraud

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Hard fraud is a felony-level offense that typically involves significantly large insurance payouts. One example of hard fraud is a “give up” scam where a car owner abandons or otherwise disposes of their car and files a false stolen car report.

Another example is a staged accident where the fraudster forces another driver into an auto accident so they can collect the insurance money.

Soft fraud

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Soft fraud is a false claim that exaggerates or misrepresents something like an accident or other insurance policy-related details. For example, you are committing soft fraud if you damage your car by backing into a tree but claim the damage was caused by another vehicle.

Another example of soft fraud is if you register your vehicle at someone else's house rather than your own home to save money on car insurance premiums.

Here are some common car insurance scams to avoid.

Staged accidents

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Perhaps the most prevalent car insurance scam is the staged accident. You can unwittingly be a victim of a staged accident if someone intentionally causes an accident with your vehicle in an effort to collect on your insurance.

The fraudster may over-exaggerate or misrepresent the injuries or property damage caused by the accident. There are several types of staged accidents, with the “swoop and squat” being the most common.

Swoop and squat

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There are usually three vehicles involved in a swoop and squat — two scammers and one innocent victim. One of the criminals does the “squat” by pulling in front of the victim’s car. The other criminal does the “swoop” by pulling in front of the squat vehicle and hitting the brakes, causing the victim to rear-end the squat car.

Sometimes a fourth vehicle is involved in this scheme. This car rides in the lane next to the victim and prevents them from changing lanes to avoid hitting the squat car. After the collision, the swoop car leaves the accident scene, and the victim takes the blame for the accident.

Panic stop

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The panic stop scam is a simpler version of the swoop and squat in that it involves the scammers getting the victim to rear-end their car. The criminal drives in front of their victim and suddenly puts on their brakes, giving the victim little time to react.

Rear-end accidents are almost always the fault of the car that slams into the car in front of it. The fraudsters may fake or embellish their injuries to get more money from the victim’s insurance company.

Drive down

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The drive down is another type of staged accident where the criminal appears to allow the victim to make a turn but then drives their car into the victim's car. When the police show up, the scammer tells them that the victim “came out of nowhere.”

Variations of the drive-down scam can occur when the victim is making a left turn, right turn, or merging into traffic from a parked position.

In the case of a left-turn collision, there is typically a third vehicle involved. After the scammer waves the victim on to make a left turn, they move forward and block the victim, trapping them in the middle of an intersection, and then the victim is hit by the third vehicle.

Sideswipe

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This scam often occurs in double left-turn lanes where the lane lines are obscured. When the victim makes a left-hand turn and drifts slightly over the line, the fraudster sideswipes the victim's vehicle. The crook then claims the accident was the victim's fault because they went over the line.

Fake injury claims

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Fake injury claims usually stem from staged accidents. A scammer who gets rear-ended in a minor fender bender may show up in court with their neck in a brace, claiming that they have whiplash or other phony injuries. Sometimes the scammers will even enlist the help of a questionable doctor or chiropractor to back up their bogus injuries.

The bad Samaritan

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Also called the good Samaritan scam, this scheme happens after a victim has gotten into an accident. While the victim is waiting for a tow truck or the police to arrive at the scene, they are approached by a “good Samaritan.”

This person offers to help the victim by advising them to use a particular body shop, medical facility, towing company, or legal services. However, the good Samaritan will direct the victim to fraudulent businesses where they’ll get a cut of the insurance claim.

Towing scam

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The towing scam is similar to the bad Samaritan, but in this case, the scammer is the tow truck driver. The tow truck shows up on its own after an accident, before you or law enforcement have a chance to call for service.

Although it seems convenient and helpful, the tow truck driver is trying to scam you. The driver has an arrangement with a certain shop that he’ll tow your car to. You won’t know you’re being conned until you get a bill for well over what the repairs should have cost.

Insurance agent scam

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Insurance agents should be there to get you the coverage you need and help if you have a claim. Unfortunately, some shady agents will try to trick you out of your money.

A fraudulent insurance agent may pretend that he’s setting up a policy for you but instead pocket the premiums you’re paying your insurance carrier. When it comes time to file a claim, you’ll learn the hard way that you’ve been duped when you realize you don’t have any insurance coverage.

Sliding

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Sliding is another way an unscrupulous insurance agent may try to cheat you. This happens when the agent “slides” additional coverage onto your car insurance policy that you didn’t want or need so they can make more commission off the sale. You could end up paying much more on your car insurance without knowing why.

Repair shop scam

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Most car insurance scams are designed to bilk money from you or your insurer. While these scams may hurt your wallet, they aren’t dangerous.

But fraudulent repairs made by a corrupt repair shop could jeopardize your safety and the safety of passengers in your car. Crooked mechanics may try to cut corners and use shoddy parts that could be hazardous when your vehicle is back on the road.

Fake airbags

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Airbags could save your life if you are ever in a serious accident. If an airbag deploys when you’re in a fender bender or accident, your insurance company will pay to have them replaced. However, some repair shops looking to cut corners may purchase cheap knockoff airbags.

If you’re ever in another accident, these counterfeit airbags can be deadly. You also have to be careful when buying a used vehicle. Make sure that the airbags have been replaced and that they’re approved by the vehicle manufacturer.

Windshield replacement scam

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Some scammers approach drivers claiming to be with an auto glass company. They may offer to fix or replace your car’s windshield for free, but it’s most likely a con. This can happen to you at the gas station, grocery store parking lot, car wash, or even in your own driveway.

These scams are prevalent in Florida, Arizona, and other states that don’t have deductibles for windshield repair or replacement. The scammer will offer you a gift card or coupon for a free meal if you sign a document.

That document is an assignment of benefits (AOB) form that gives them the right to file a claim with your insurance company. The scammers usually claim much more than the typical cost of a windshield replacement.

Policyholder scams

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Insurance fraud isn’t always perpetrated by someone else. In some cases, it’s the policyholder who is the scammer.

In a “give-up” scam, a car owner may file a fraudulent claim saying their car was stolen after they sold it or dumped it somewhere. A “jump in” scam involves lying about someone being in the vehicle at the time of an accident.

Making any false statements about an accident, such as the date it occurred or the circumstances of how the car was damaged, to collect on your insurance is considered insurance fraud.

Premium evasion

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Where you live impacts how much you’ll have to pay for your car insurance premiums. If you use a different address than your own in an attempt to lower your car insurance premiums, that’s insurance fraud.

For example, if you live in Detroit, where annual insurance premiums average $5,460, insuring your vehicle using your mother’s address in nearby Hazel Park would cost you $3,110. While you’d save about $2,000, it could also land you in jail.

Bottom line

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There are many people out there looking to make a quick buck by scamming you or your insurance company. Even the best car insurance companies can fall victim to scammers.

The key to preventing yourself from becoming a victim is knowing what insurance fraud looks like so you’ll know not to trust someone who offers to replace your windshield for free.

Knowing what constitutes car insurance fraud can also help prevent you from getting in trouble for seemingly minor things that you do to cut corners, which are actually illegal.

If you’ve been a victim of auto insurance scams or suspect fraud, you can report it to the National Insurance Crime Bureau at (800) TEL-NICB. The National Association of Insurance Commissioners (NAIC) also has an online fraud reporting tool you can use.

Finally, you should also notify your insurance company and the department of insurance in your state as soon as possible.

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Author Details

Danielle Letenyei

Danielle Letenyei is a professional writer living in Madison, Wisconsin. Her interests include budgeting, travel, credit cards, insurance, and creative side gigs. She hopes her work on these topics can help others navigate the intricate landscape of personal finance.