Fraud schemes that financially-strapped clients may be considering

Some consumers who owe money on vehicle loans during the COVID-19 pandemic may be tempted to make false auto theft claims, an independent adjuster warns.

“Insureds who are desperate for money may have the vehicle stolen and burned to ensure the vehicle is a total loss. In some cases, they may also strip the vehicle and sell the parts to make extra money,” said James Barbieri, CEO of Claims Advantage Inc., in a recent A.M. Best Company Inc. podcast.

Barbieri, a former police officer, was asked how the COVID-19 crisis creates an environment for fraudulent insurance claims.

As a result of the prolonged lockdowns and economic disruption, some people’s life savings are being depleted, Barbieri suggested during the podcast, posted June 25. This, he said, could result in some consumers engaging in insurance fraud scams.

Many motorists who borrowed money to buy a second vehicle before the pandemic may no longer need that extra set of wheels. So they might drive it into a lake or pond, report it stolen and collect the insurance, said Barbieri, adding this is also common with motorcycles and recreational vehicles.

His comments pertain to the northeastern United States (Barbieri is a member of the New England Chapter International Association of Special Investigation Units and his company as offices in Georgia and Rhode Island) but Canadian insurers are making similar observations.

Research shows a relationship between unemployment and increased property crime, particularly when high unemployment rates are sustained, the Insurance Bureau of Canada said in Insurance Fraud in Times of Crisis: COVID-19 Pandemic-Related risks in the P&C Insurance Industry, a paper released June 2.

In that paper, IBC warned some vehicles in Canada may get reported stolen because the owner is unable to finance it. There is also heightened risk of arson – particularly of detached garages or shed – and in staged collisions, IBC reported at the time.

Barbieri has observed similar instances of fraud. For example, the pandemic has resulted in an increase in staged auto accidents, he said on the recent A.M. Best podcast.

In some cases, medical rehabilitation clinics are claiming for treatments even though they were shut down due to the pandemic, Barbieri reported.

With staged collisions, fraudsters often hire people to jump into a vehicle after the collision and then later falsely claim soft-tissue injuries, added Barbieri.

In one case, Barbieri obtained a confession from a claimant who had a damaged vehicle towed.

“The tow truck dropped down the damaged vehicle, they sprinkled debris on the ground, and then another vehicle arrived with five passengers, they got into the damaged vehicle, and called the police.”

Feature image via iStock.com/Des Green