Auto Insurance Fraud: What Are the Possible Consequences?
Car insurance fraud involves intentionally misleading your car insurance provider. For example, by claiming more damage than you actually sustained. Or by staging a collision in order to receive compensation. Car insurance fraud can have serious consequences. We’ll explain it to you here.
#1 Your car insurance claim is denied
If you commit insurance fraud, you run the risk of having your auto insurance coverage denied. The insurer will then not pay out any compensation for your claim. In fact, the entire claim may be denied, even though only a small part of it involved fraud. Suppose you were hit by another car. When reporting the damage, you decide to also claim for a number of old dents that you never had repaired. It may seem relatively harmless, but if your auto insurer discovers this, they may refuse to pay your entire claim. You’ll then end up with higher costs than if you hadn’t committed fraud.
#2 Canceling Your Auto Insurance
Insurers take insurance fraud very seriously. They do not want to have someone who commits insurance fraud as a policyholder. That is why they almost always terminate a car insurance policy once insurance fraud has been established. Do you have any other active insurance policies with the same insurance company? If so, the insurer will assess whether to terminate those as well. The reason your auto insurance and any other policies are being terminated is that you have breached the insurer’s trust. The insurer can no longer be certain that you will comply with the agreed-upon terms of the policy and therefore almost always chooses to terminate all active policies.
#3 Recording of Personal Data in an Insurer's Fraud Registry
Is your auto insurance company canceling your policy? If so, the insurer will store your information in its internal database. Many people confuse this with a so-called“blacklist.” However, there is no such thing as a blacklist. They do, however, record when and why they terminate a policy. This is to alert their own organization and keep it vigilant. In this way, they ensure that you cannot take out another policy as long as you are still registered as a fraudster. Internal records are not visible to other insurers.
#4 Registration with the CIS Foundation
CIS Foundation stands for Central Information System Foundation. Its database stores all insurance data that is important to share with insurers. If it is proven that you have committed insurance fraud involving your car, you will be registered in the CIS. Your auto insurer will then enter your personal information into the CIS database, along with the reason for the registration. Other insurers and authorized parties can access this information. The purpose of the database is to make potential risks for insurers manageable and to prevent fraud as much as possible.
If you have a CIS record for fraud, it’s often difficult to get new auto insurance. An insurer always checks the CIS database before accepting an insurance application. That way, they can quickly determine whether you’re listed in the database or not. If you have a CIS record, your only real option is to turn to the insurance company De Vereende. De Vereende specializes in insuring special risks. Thanks to their broad underwriting policy, you can still take out insurance even with a CIS record.
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#5 Report to the Center for Combating Insurance Fraud (CBV)
The CBV is a division within the DutchAssociation of Insurers, dedicated to supporting insurers in combating fraud and other forms of insurance crime. Insurance fraud can also affect your career. If you’re applying for a job in the insurance industry or at a financial institution, there’s a good chance the company will check with the CBV. If they see a report of insurance fraud, they may reject your application—after all, it doesn’t make a very good impression.
#6 Financial Consequences
Of course, insurance fraud also has a number of financial consequences. First, you’ll pay a standard fine of €532. Second, you’ll be required to reimburse the insurer for the investigation costs incurred. An insurer must be able to prove that insurance fraud has actually occurred. That’s why they conduct an investigation when fraud is suspected. These investigation costs can sometimes be quite high, especially if an external investigation firm or an expert needs to be hired. Finally, taking out a new auto insurance policy will be more expensive than usual. This means you’ll pay a higher premium than normal. You’ll also have to pay three months’ premium in advance and provide a security deposit to Vereende. Vereende can use this security deposit to offset any outstanding premiums if you’re late with your payments.
#7 Reporting to the police
The final consequence is also the most severe: the auto insurer may choose to file a report with the police. In practice, however, this does not happen often. Filing a report is, of course, a major step and is usually done only if the amount of fraud is very high or if organized crime is involved.
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