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Auto insurance fraud schemes: creativity at its most

Of all the challenges the traditional insurance industry has been facing for years and years insurance fraud is considered the most serious: apart from tarnished reputation it costs billions dollars each year. Insurance fraudsters use their creativeness to maximum and the schemes can take numerous forms — from simple and seamlessly harmless like telling lies about vehicle parking spot. However, this 'harmless' lies results in fraudulent claims submissions. So regardless of the fraud scenario, it ultimately impacts the insurance company bottom line.

The insurance fraud has grown into an entire industry. The lack of collaboration among the insurers is one of the missing pieces in combating the insurance fraud on a global scale. The fraudulent activity has reached the point where you cannot rely on insurers joining efforts to tackle the challenge voluntarily. Speaking about the financial benefit sought by criminals — it varies greatly depending on the chosen scheme. For instance, one insurance ghost broker managed to make £89,000 by selling fake policies. The paper accident scheme might make around $1000: many insurers do not bother to send an investigator to check the vehicle.

Let's dwell on some of the most popular fraud schemes:

Car ditching. Ditching is also known as driver's give-up. It literally means the car owner gets rid of the car in order to cash in on the insurance company or to settle an outstanding loan. The practice shows, that the vehicle is mostly expensive and was purchased with a small down payment. Afterwards, the car is reported stolen. In many cases the fraudster just leaves the car and hopes it will eventually get stolen and stripped for parts. By the way this particular scheme might involve homeowner's insurance for the property which is also stolen with the car. How convenient!

Past posting. The car owner gets involved in a car accident. And as it appears — he or she does not have insurance. So the person gets insurance, lets some time to pass and then simply reports the vehicle as being damaged in an accident. The archaic and traditional insurance has nothing left to do but to let the fraudster collect for the damages.

Vehicle repair. That is the first scheme that will definitely not fly with kasko2go technology (just like all the others). This scheme implies the billing of the new parts on the vehicle when used parts were replaced. Sometimes it happens that this scenario involves criminal conspiracy between the adjuster and repair shop.

Phantom vehicles. Every vehicle has its owner, and certificate of title contains the information about the vehicle owner. However, this legal document is not 100% proof that vehicle exists in reality, but it is the basis for the insurance policies issuance. Collecting on a phantom vehicle has become quite popular and quite easy to do.

Staged accidents. The scenario implies a fraudster being involved in an accident  which is planned and predetermined to occur. This scheme requires scrupulous preparation and is usually organized by fraud rings, and fraudsters move from one area to another. The same car is used again and again and this is exactly what keeps this scheme from being discovered.

Inflated damages. The automobile repair sphere is characterized with stiff competition and this causes development of the scenarios where some establishments inflate estimated costs in order to cover deductibles.

So, as you see the fraudsters' talent and creativity has no boundaries. However, all of these schemes are only possible within the traditional insurance industry, free from technologies, where insurance knows nothing about the driver.

kasko2go quintessential tech and data-driven approach provide deep personalization and close look at the psychological portrait of an individual. That means we provide the mechanism to learn the driver completely — his driving patterns, behavior, involvement into fraud rings and we know the exact state of the vehicle in real-time, all of the damages. We are proponents of proactive and preventive vision on insurance, and we know exactly what to expect from every driver.

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