Most people say they don’t commit fraud, but survey shows that's not quite the case
Overall, 21% of auto and 30% of home policyholders said they’ve misled their insurer to save money.
When asked outright if they have ever committed insurance fraud, most people say no. Just 9% of auto policyholders and 15% of home policyholders admitted to deceiving an insurance company, according to a ValuePenguin survey. However, when asked about tactics deployed to lower insurance costs, these numbers shift.
The same survey found that more than 30% of both U.S. home and auto policyholders have submitted claims for preexisting damage, while 31% of auto and 34% of home insureds said they would include preexisting damage in a future claim, should they have to file one.
Why the disconnect? According to Divya Sangameshwar, insurance spokesperson for ValuePenguin parent company LendingTree, LLC, it all comes down to how you ask the question.
“We asked two questions two questions. The first question was, ‘Do you commit insurance fraud?’ Around 90% of people said they don’t. Then we dug into it and started asking people about what they were doing to save money, and a lot of those techniques were actually fraudulent,” Sangameshwar says. “The disparity between what people think of as fraud and what actually is fraud, and how Americans are unwittingly committing fraud, was really shocking to us.”
Overall, 21% of auto and 30% of home policyholders said they’ve misled an insurance company to save money.
When most Americans think of “insurance fraud,” their minds leap to staged accidents and acts of arson, Sangameshwar explains, and not “soft fraud,” like lying about the average annual miles they drive or the value of a stolen item.
Some of the most common types of soft frauds in auto insurance that people admitted to were using a fake address to get a more favorable rate, reporting a vehicle as stolen to dispose of it and cash in, not reporting all the people who drive the car, reporting they use the vehicle less than they actually do, and claiming wear and tear on the vehicle was caused by an accident.
Home policyholders were more likely to omit certain facts, like owning a dangerous dog breed, having a trampoline or owning a pool, according to ValuePenguin. Other common soft frauds seen in home insurance were concealing that the residence is actually a rental or used for a business, asking a repair person to increase their estimate or bill to cover a deductible and lying about having security systems.
Policyholders caught committing soft insurance fraud might not end up in jail, but they do face the consequences of higher premiums and potentially having their file flagged as a higher-risk driver or a potential fraud risk, Sangameshwar says.
She says the biggest takeaway from the research was that insurance fraud, even in its softer forms, is something that is getting harder to pull off.
Insurance companies are stepping up their fraud detection, Sangameshwar notes, pointing to the use of drones to inspect homes, calls for more in-person inspections for cars and homes, and the use of AI to track down omissions and minor instances of fraud.
“Insurance companies are facing huge losses and they want to cut back on any avenue of loss that they can,” she says. “They can’t control the climate, but they can stop people from lying.”
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