What Are the Common Types of Car Insurance Fraud?

Last Updated on December 27, 2025

Car insurance fraud isn’t just “big criminal rings” staging crashes—everyday policyholders and shady repair operators can get involved too. And everyone ends up paying for it through higher premiums. The NAIC notes that fraud can be “hard” (intentional loss) or “soft” (exaggerating or misrepresenting facts), and it’s a major cost driver across the insurance industry. For an official overview, see the NAIC’s consumer resource on insurance fraud.

Below are the most common types of car insurance fraud, real-world examples to watch for, and what to do if you think you’re being targeted.

Key Takeaways

• Car insurance fraud includes “hard fraud” (intentional loss like staged crashes) and “soft fraud” (padding a real claim or lying on an application).
• Common schemes include garaging/address misrepresentation, staged accidents (like swoop-and-squat), fake witnesses, and exaggerated injury or repair claims.
• Repair fraud is a real risk—especially with safety parts like airbags and with aggressive windshield “free replacement” solicitations.
• Protect yourself with documentation (photos, witness info, dashcam footage), reputable repair choices, and fast reporting to your insurer and fraud-reporting resources.

Hard Fraud vs. Soft Fraud

Most auto-related fraud falls into two broad buckets:

• Hard fraud: Someone deliberately causes a loss—like staging a crash or “making” a car disappear—to collect a payout.
• Soft fraud: A real claim exists, but someone exaggerates injuries, inflates repair costs, or lies about key details (like garaging address or who drives the car).

Both can lead to claim denial, policy cancellation, and even criminal charges.

Vehicle Dumping (Owner Give-Up)

In an “owner give-up,” someone intentionally gets rid of a vehicle and then claims it was stolen or destroyed in an accident. Examples include abandoning a car, torching it, or damaging it beyond repair and reporting the loss as something else.

If your vehicle is actually stolen, that’s different—comprehensive coverage may help. Here’s what to know about car insurance coverage for theft.

Reporting a Sold Vehicle as Stolen

This scam happens when someone sells a vehicle (legitimately or not), then reports it stolen to collect an insurance payout on top of the sale proceeds. Variations include fake bills of sale, “sold to a stranger” stories, and delayed theft reports designed to muddy the timeline.

Fraud like this can unravel quickly if investigators find maintenance records, toll/plate-reader hits, key programming logs, or communications that contradict the report.

Rate Evasion: Using a False Address or ZIP Code

Some drivers try to lower premiums by lying about where the car is garaged—using a “safer” ZIP code, a relative’s address, or a prior address after moving. The problem: garaging location is a pricing factor because your ZIP code can strongly affect auto insurance rates.

This can backfire badly. If an insurer discovers material misrepresentation—like a fake garaging address—your claim could be denied. See how a false address on your policy can lead to claim denial.

Repair Shop Fraud and “Counterfeit Safety Parts”

Not all fraud is about the accident itself—some schemes happen after the crash, when your vehicle is being repaired. Common examples include billing for new OEM parts but installing cheaper parts, inflating labor, or charging for work never performed.

Faulty or Counterfeit Airbag Replacement

Airbags and airbag inflators are a major safety concern. Some dishonest operators may install counterfeit or substandard airbag components after a crash, or charge for a proper replacement while cutting dangerous corners. NHTSA has warned that cheap, substandard replacement air bag inflators can cause severe injury or death in a subsequent crash. Source

If your airbags deployed and you’re filing a claim, understand what insurance typically covers for airbag replacement, and ask for itemized invoices that list the exact parts used.

Windshield Replacement Scams

Another common repair-related scheme involves glass. You may be approached with “free windshield replacement” offers or pressured to sign paperwork on the spot. Sometimes the work is low quality, the claim is inflated, or the shop bills for add-ons you didn’t authorize.

If you need legitimate glass work, start with what your policy actually covers: will car insurance replace a windshield? Then choose a reputable shop, confirm calibration needs (for cameras/sensors), and avoid signing blank or unclear authorization forms.

Staged Car Accident Fraud

Staged accidents (“crash-for-cash”) can involve organized groups, fake passengers, and “helpful” witnesses. The goal is to make you look at fault so your insurer pays vehicle damage and injury claims. The National Insurance Crime Bureau (NICB) tracks these schemes and outlines several common patterns. Source

• Swoop-and-Squat: One vehicle cuts in, another brakes hard, and you rear-end the “squat” vehicle while the “swoop” car escapes.
• Panic Stop: A vehicle ahead slams on the brakes at the moment you’re most vulnerable (traffic merge, distraction, blocked lane change).
• Drive-Down / Wave-Down: A scammer “lets you in” or makes it look like you pulled out unsafely, then another vehicle hits you.
• Side Swipe: Another driver drifts into your lane during a turn or lane change, then claims you caused it.

These scams are especially painful because rear-end collisions often make the trailing driver appear at fault at first glance. A dashcam, photos, and independent witnesses can make or break the outcome.

False Witness Scams

Some staged-accident rings use “witnesses” who seem random but are actually coordinated. They may insist you admitted fault, claim the other driver had the right-of-way, or exaggerate how fast you were going.

If an accident becomes a “they said / you said” dispute, document everything immediately and be cautious about recorded statements until you’ve gathered your notes, photos, and contact information.

Lying on a Car Insurance Application

Application misrepresentation is one of the most common forms of fraud. It includes lying about prior tickets/accidents, claiming the wrong person is the primary driver, understating mileage, or hiding household drivers. If you’re tempted to “bend” the truth to get a lower rate, don’t—here’s what can happen if you’re caught lying about your driving history.

Exaggerated Injury, Damage, or Expense Claims

This is classic “soft fraud”: a real accident occurs, then someone pads the claim. Examples include adding old damage to a new claim, inflating repair estimates, overstating lost wages, or exaggerating injuries and treatment.

Medical-related padding sometimes involves billing games tied to coverage like medical payments coverage, unnecessary treatment plans, or inflated invoices. Insurers look closely at documentation, consistency, and medical records when costs spike beyond what the crash severity suggests.

If the other party is misrepresenting what happened, you’re not powerless—start here: what to do if the at-fault party lies about the accident.

How to Protect Yourself From Auto Insurance Fraud

• Get a dashcam if you can. Video evidence is one of the strongest anti-fraud tools for staged-crash disputes.
• Keep your distance. Extra following distance helps prevent “panic stop” and rear-end setups.
• Document everything immediately. Photos, driver info, passenger count, vehicle positions, and witness contacts.
• Be cautious with tow and repair solicitations. Avoid “parking lot” offers and verify shop credentials and reviews.
• Don’t sign unclear paperwork. Especially authorizations that allow open-ended charges.

What Happens if an Insurer Suspects Fraud?

Most large insurers have Special Investigations Units (SIUs) and use data tools to flag suspicious patterns. If something doesn’t add up, they may request additional documents, conduct recorded interviews, inspect the vehicle more closely, or verify details like garaging address and repair invoices.

If fraud is proven, your claim may be denied. Learn more about how and why insurers deny claims—and why accurate documentation matters.

How to Report Suspected Car Insurance Fraud

If you believe a scammer staged an accident, a repair shop is billing fraudulently, or someone is attempting a fraudulent claim against you:

• Report it to your insurer immediately and provide your photos, notes, and any dashcam footage.
• Consider reporting staged-accident activity to NICB (they accept tips online and by phone). NICB staged accident resource
• If you suspect counterfeit safety parts (like airbags), follow NHTSA’s guidance on reporting and next steps. NHTSA consumer alert

Fraud is a crime. The best defense is staying calm, documenting thoroughly, and reporting suspicious behavior quickly.

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