The underwriting process starts with applicants providing details about themselves, their automobiles, other drivers and answering many questions. In the same way, claims start with a report from policyholders. Car insurance misrepresentation is lying in these processes to get cheaper rates or higher claim settlements and it is fraud. Any deliberate attempt to gain financial advantage or cheat your insurer is a fraud. But motorists often provide false information or omit an important detail out of negligence and there are different levels to misrepresentation.
When applicants don’t pay attention during a quote or claim process, they may negligently misrepresent the facts, omit important information and mislead the automobile insurers into giving them lower rates, discounts they don’t qualify for or pay more for claims. However, often these details don’t result in serious differences in premiums and can even go against the policyholder. And they get found out and get charged higher premiums.
For example, people are often asked about their mileage and many people lie about it. But this may not matter in many cases because lying and saying you travel 10,000 miles a year when you are doing 12,000 miles a year may not make any difference in premium. Secondly, companies may have their own proprietary ways of calculating yearly mileage based on commute distance. And finally, many companies may require proof of actual yearly mileage if they are offering any discounts for low mileage.
As you can see, companies are getting smarter in catching or evading these lies. In any case, you should make sure to provide information to the best of your knowledge when you are required to do so. It may not be worth the effort to try and lie.
Auto insurance material misrepresentations are more serious in nature as there are fraudulent attempts to cheat the providers by getting them offer lower rates or pay higher amounts for claims when you don’t deserve. They are intentional and serious in nature. For example, knowingly providing an address different from where you actually live is one of the common attempts. The premiums can be hundreds of dollars different between two zip codes and this results in serious revenue losses for the companies.
And people knowingly commit car insurance fraud in many ways. When people make false statements, they can often be in for a larger claim settlement. Trying to make more than one claim for injuries and damages that occurred in one accident is one of the obvious ones and can have serious legal consequences when you get caught. For example, getting rid of your car and pretending it is stolen and making a theft claim for it is a fraud and crime. Lying about your address or not declaring a teenager living with you are some of the other fraudulent misrepresentations in vehicle insurance.
Consequences of Frauds
Automobile insurers try their best to catch these misrepresentations and they are often successful. They can and do try to verify the facts as early as possible but they can investigate again when they suspect a fraudulent claim. Even they program computers to catch these claims by figuring out and flagging the common patterns. Here are some of the consequences of attempted frauds;
- They can find out about the traffic ticket you forgot to mention, recalculate your premium and ask you to make up the difference.
- If they catch it in the early days of a new policy, they can cancel your policy. Otherwise, they can rectify the situation at the next renewal with non-renewal.
- They can press charges against people who tried to cheat with false claims. Insurance fraud is misdemeanour in some states with fines and possible jail sentences. In other states it is actually a felony and carries higher fines, prison sentence and you still have to pay back the money if you managed to get a false claim through.
- These infractions and criminal charges show on your driving records and make it harder and certainly more expensive to get car insurance next time. It affects eligibility with some companies as well.
Efforts to Catch Liars
There are so many ways vehicle insurance companies can foil a material misrepresentation and act accordingly in one of the above ways that often it isn’t worth the effort. Here are some of the ways they can catch the lies;
- They always get your driving records and find out about the accidents and traffic tickets there. For example, you may have left out a speeding ticket you got two years ago and got a low auto insurance quote. Then, the company checks the records, learns the truth and asks you higher premiums when it comes to buying the policy.
- They nearly always check your credit score where it is allowed. Even if you told them you had a great credit score, they will find out the exact score and adjust the premium accordingly or they may even cancel the policy with a notice if your credit score is terrible.
- They can verify your address or other people living with you in the same household through your credit history as well because your address and people linked to that address show on credit reports.
- They can always ask for a proof of address or other details if they cannot verify it independently. Most car insurance companies check addresses.
- They have a way of spotting fraudulent claims based on predetermined patterns and they get pulled out to be investigated in detail.
Trying to defraud an auto insurance company may be too much of a risk to take with a high chance of getting caught and suffering serious consequences. While some people try to lower their premiums with these elaborate misrepresentations, many people spare an hour or so, shop around by getting a few quotes and find the best deal that saves them enough money.