insurance

6 shadiest auto insurance fraud schemes

Auto premium evasion
Auto premium evasion © Donald Joski/Shutterstock.com

Policyholders are not completely innocent when it comes to fraud.

The Insurance Information Institute, a New York-based trade group, says some customers deliberately mislead insurers by using a false address from a lower-premium area when registering their vehicles.

A related auto insurance fraud is deliberately failing to add a new driver in the household, typically a teenager, to the family policy.

The institute says it's estimated that these sorts of lies and omissions cost the auto insurance industry as much as $16 billion a year.

In theory, premium evaders could go to jail for fraud, but it's more likely they'll lose their auto insurance coverage, says Thomas J. Simeone, a Washington, D.C., lawyer who specializes in liability issues.

"Any intentional misstatement on an insurance application can definitely lead to a policy being canceled immediately and a claim being denied," says Simeone. "Moreover, the insurance company may seek to recover any previous claims paid before uncovering the false statement."

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