How To Protect Yourself from Car Insurance Fraud

Car insurance fraud is becoming a growing concern in India, resulting in significant money losses for both motorists and insurers. According to Indiaforensic Research, the insurance sector in India loses Rs 30,401 crore every year due to fraud. Among them, car insurance fraud is one of the most common one which emphasizes the importance of being careful for vehicle owners.

Common Frauds in Car Insurance in India

1. Staged Accidents: Scams go so far as to stage accidents themselves for posing false claims. One popular way is the "Swoop and Squat," where a car suddenly swerves and brakes ahead of an unsuspecting driver, and a collision occurs. The scammers then make claims for fake injuries and damage to vehicles.

2. Exaggeration of Claims: Insurers exaggerate the degree of damages or injuries from an actual accident for greater compensation. For example, reporting pre-existing dents as part of the new accident.

3. Misrepresentation of Theft: People report their cars stolen to collect insurance money when the car is not stolen.

4. Application Fraud: Giving false information at the time of insurance application, i.e., lying about the usage of the vehicle or the driving record of the applicant, in an attempt to be eligible for lower premiums.

Ways to Protect Against Car Insurance Fraud

1. Install a Dashcam: Attaching a dashcam to your car offers undeniable evidence of roadside accidents in real time. Evidence from dashcam footage played an important role in resolving the majority of contentious cases in 2024, and shed light on investigation into accidents.

2. Maintain Detailed Documentation: Maintain detailed documentation rigorously of the condition of your car, the photos, as well as servicing history. All this will ensure that the claims received are authentic and verifiable.

3. Exercise Caution for Unsolicited Offers: Scammers come in the disguise of insurance agents with a very tempting offer. Check the credentials of agents and never pay without proper documents.

4. Inform about Suspicious Transactions: In case you come across or suspect any fraudulent transactions, inform the Insurance Regulatory and Development Authority of India (IRDAI) or the Insurance Ombudsman. Reporting at an early stage will discourage additional fraudulent claims and save other policyholders.

5. Read Policy Details: Carefully read the terms and conditions of your insurance policy. Understanding the details of coverage aids in the identification and prevention of fraud.

"Last year, I was in a minor accident, and a so-called insurance agent approached me, offering to handle my claim quickly for a small commission. Something felt really off, so I contacted my insurer directly. Turns out, he was a scammer trying to pocket money," says Soumitra, a 67-year-old resident of Siliguri, West Bengal. "These scams are everywhere now, so I tell everyone to deal only with their official insurer and never trust any middleman blindly". 

Technological Measures

The Indian insurance industry is rapidly embracing cutting-edge technologies in its fight against fraud. Experian is one such company that launched its Hunter Fraud Score in 2016. As a statistical analysis tool, it helps insurers detect discrepancies in insurance policy applications and claims, thus minimizing the chances of fraud. By 2024, with its mass deployment, its ability to contribute to industry-wide fraud fight efforts got a big boost. 

In addition, Google introduced "DigiKavach" in 2023, an online fraud prevention system meant to fight financial fraud in India. The venture was established in partnership with the Fintech Association for Consumer Empowerment (FACE) and the Ministry of Home Affairs aimed at prevention against unwanted forces and digital literacy assistance. Its introduction in the financial sector has added security for insurance transactions.

Legal Framework and Support Systems

India's government has implemented mechanisms to combat insurance fraud. The Insurance Ombudsman scheme provides a platform for policyholders to settle grievances over insurance claims and services. Policyholders may go to the Ombudsman for complaints that include delay in claim settlement, a dispute over the premium rate, or misdescription of policy conditions. This initiative provides fair and unbiased resolution of disputes to the complainants.

Insurance fraud not only leads to financial loss but also forces honest policyholders to pay higher premiums. Through awareness, preventive measures, and the use of technology, drivers can save themselves from falling prey to such fraud. Mass awareness and preventive measures are critical in framing an open and credible insurance culture for India.