Car Insurance Fraud: Spot Red Flags and Stay Safe

What Is Car Insurance Fraud?

Car Insurance fraud is when someone lies to or misleads an insurance company to receive extra benefits, either when they buy the policy or when they file a claim. Anyone in the chain can do it, including the policyholder, service providers or even fraudulent insurance brokers.

To clarify what Car Insurance fraud is, it's any act intended to deceive an insurer for illegal gain. The methods may be different, such as staging accidents or buying insurance that don't exist, but the goal is always the same.

Car Insurance fraud looks like this: In April 2025, a man from Delhi and several accomplices filed false claims amounting to ₹30 crore for accident repairs. They used fake bills, submitted duplicate claims, altered photos and changed registration details. This case clearly illustrates the scammers' intent to deceive the insurance company and fraudulently obtain money.
 

What Are the Types of Car Insurance Fraud?

When it comes to Car Insurance in India, these are the main kinds of fraud:

1. Fake accidents

To file larger claims, scammers often fabricate accidents or exaggerate minor damages to make them appear more serious.

2. Overcharged repairs

A legitimate claim might become a false one when garages overcharge for repairs or replace items that aren't damaged.

3. False Victims

Scammers add fake passengers to accident claims to obtain money from Personal Accident Coverage in a fraudulent manner.

4. Policy Misrepresentation

Some people provide false information when applying for coverage, such as fake addresses or altered vehicle usage records, to reduce their premiums.

5. Fake Documents

One common approach to back up misleading allegations is to make fake repair bills, driver's licenses or even police FIRs.
 

What Are the Differences Between Soft Fraud and Hard Fraud?

There are several ways that Car Insurance fraud may happen. While some cases are simple exaggerations, others are deliberate frauds from the start. To detect and address them quickly, insurers categorise them as hard and soft fraud.

Soft Fraud

Soft fraud occurs when someone adds incorrect information to a legitimate accident or loss to increase the claim amount. Exaggerating the damage, adding items that were never taken or requesting repairs unrelated to the accident are a few examples of this. Even though the situation is real, it is still fraudulent since misleading information is being given.

Example:

• Claiming for both old scratches and new damage from an accident.
• Accessories that were never in the car were listed as stolen.
• Asking a garage to add unnecessary repairs to the bill.

Hard Fraud

Hard fraud is when an event or loss is completely fabricated and planned in advance to deceive the insurance company. There are times when the whole thing, like a fake accident, a false theft report or intentional damage, has been carried out to make money. Hard fraud is a serious crime in India and the punishments can include jail time and hefty penalties.

Example:

• Arranging an accident with another driver in order to collect damages and injury costs.
• Secretly selling a car and then reporting it as stolen.
• Intentionally causing harm to a vehicle, like burning it, then claiming it was an accident.

How AI and Data Analytics Detect Fraud

Insurance companies currently employ cutting-edge technologies to swiftly detect both soft and hard fraud:

• Pattern checks: Identify recurring claims from the same individual, vehicle, garage or location.
• Cost analyses: Examine a claim's repair expenses against going market rates.
• AI-powered photo checks: Examine damaged images for indications of alteration or inaccurate timestamps.
• Check records: Compare the details of the claims with police reports, traffic records and other official sources.
   

What Are the Consequences of Car Insurance Fraud?

Some people might be tempted to commit Car Insurance fraud, but Indian law has serious consequences for doing so.

• Section 420 of the Indian Penal Code addresses dishonest and fraudulent requests for property or its delivery.
• Punishments for such violations can include imprisonment of up to seven years and substantial fines. Insurance companies may blacklist these individuals, potentially resulting in the termination of their coverage.
• It could be very hard or even impossible, to obtain insurance later if the cheating is found out.

Even those unknowingly involved in fraud—like submitting unnecessarily expensive bills from a garage—can face legal trouble if they fail to verify authenticity.
 

What Is a Fake Insurance Policy?

In India, over 60 million vehicles are insured, which makes the risk of fraud quite high. Some insurance policies sold by unofficial brokers might look trustworthy, but they usually don't  provide the same legal protection.

Some signs to look out for are

• The insurer's website does not provide a method for verifying policy numbers.
• Premiums that are unusually low
• No digital certificate or QR code
• The insurer has not provided any official communication or receipts.

IRDAI often alerts people about these kinds of frauds. Buy insurance plans via licensed insurers or reputable brokers.

 

What Are the Ways to Avoid Car Insurance Fraud?

Staying alert and double-checking important details are essential to avoid Car Insurance fraud. Here's how:

1. Verify the policy

Always double-check the policy number on the insurance company's website or through the mParivahan app.

2. Use authorised platforms

Purchase insurance from only IRDAI-registered providers or licensed agents.

3. Keep documentation ready

If you need to file a claim, keep your FIRs, damage photos, dashcam footage and repair bills ready to go. These will protect you during an investigation.

4. Watch out for red flags

Warning signs of deception include refusing to provide written communication, urgent requests for cash payments or unrealistically low premiums.

5. Read the small print

Before signing any policy, ensure you understand what it doesn't cover, how to file a claim and the policy's limits.

6. Report suspicious activity

Notify the IRDAI complaints cell and your insurer of any questionable conduct.
 

Conclusion

Protecting yourself from Car Insurance fraud is as important as securing your car to avoid theft. Read the fine print, know what to look out for; and only buy from companies you can trust.

The first line of defence against fraud is picking a reliable insurance provider. With Shriram Car Insurance, you don’t just get a policy—you gain a partner you can trust. We ensure that your coverage is authentic, dependable and available when you need it most, with affordable and customizable plans, zero documentation and fast claim processing.  With add-ons such as Personal Belongings Cover, Roadside Assistance and Zero Depreciation Cover, you can make your policy even more comprehensive and suited to your needs. Discover our plans today.

 

FAQs

1. How can I know whether my Car Insurance is genuine or fake?

Go to the IRDAI website or the insurance company's online verification tools. If there is a QR code, you can also scan it.

 

2. Is it illegal to inflate the claim amount slightly?

Yes. According to the law, even minor lies are regarded as soft fraud and are illegal.

 

3. Can garages be involved in Car Insurance fraud?

Yes, it's possible that some garages might work together with car owners to overstate damage or bill for unnecessary repairs.

 

4. What should I do if I bought Car Insurance from a fake agent?

Inform your insurance company, the police and the IRDAI right away. You might also need to get a new insurance policy that is still valid.

 

5. Are there any apps that help avoid Car Insurance fraud?

You may find out the status of your Car Insurance by using the mParivahan app or going to the Parivahan website.