Car insurance scams in the Philippines: What you need to know

For every car owner in the country, car insurance is a crucial investment. Why? Well, that’s because it provides them with financial protection against accidents, theft, and other unforeseen events or damages. However, no matter how essential car insurance is, it is not protected from scams. Yes, every year many applicants get exploited by scammers who are always on the lookout for unsuspecting policyholders.

As for car insurance scams in the Philippines, they are becoming increasingly sophisticated, thus requiring car owners to be much more informed and vigilant.

Don’t worry, if you are alien to the subject, because Carmudi is by your side informing you about the various scams prevalent in the Philippines auto insurance market. And sure we’ll be giving out practical tips on how to avoid falling victim to such fraudulent schemes.

So, without any delay let’s get started and delve into the grey world of car insurance scams.

Also Read: Do’s and don’ts of car insurance policy in the Philippines

Understanding car insurance scams

As the name suggests, car insurance scams are designed to earn money by deceiving and defrauding policyholders and insurance companies. Such scams often lead to significant financial losses, legal trouble, and stress.

Note, that to protect yourself from such fraudulent activities the first step is awareness and education. And that is what we are trying to do here

Types of car insurance scams

There are several types of car insurance scams in the Philippines which a prospective applicant often falls prey to, for instance -

• Ghost brokers
• Staged accidents
• False repair shops
• Fake insurance policies
• Identity theft

Though each one of these scams seems self-explanatory, there is a lot more to each of them. Let us now understand each of them in detail and know how they can be avoided.

Ghost brokers

Ghost brokers are individuals or groups posing as legitimate insurance agents who sell fake insurance policies to unsuspecting car owners. These scammers often offer policies at significantly lower prices, attracting budget-conscious buyers. Once the victim pays for the policy, they receive fake documents, and as expected the ghost broker disappears. The victim only realizes they’ve been scammed when they try to file a claim and discover that their policy is invalid.

Ways to avoid ghost brokers

• Always verify the authenticity of the insurance agent and company before purchasing a policy.
• Be cautious of deals that seem too good to be true, especially those offered online or through unofficial channels.
• Contact the insurance company directly to confirm the legitimacy of the policy and agent.

Staged accidents

In staged accident scams, a fraudster intentionally causes or fake accidents to file fraudulent insurance claims. They often work in groups, wherein some individuals act as witnesses and others as drivers, or passengers. The scammer often exaggerates injuries or damages to maximize their insurance payouts. This type of scam not only insurance companies but also innocent drivers that are a part of the staged accident.

Ways to avoid staged accidents

• Install a dashboard camera (dashcam) to record your drives and provide evidence in case of an accident.
• Always drive defensively and be aware of your surroundings.
• Report suspicious behavior, such as drivers suddenly braking for no reason, to the authorities.

False repair shops

Another common scam is a false repair shop, wherein car repair centers along with the car owners and/or insurance agents practice fraudulent activities like inflating the repair cost or charging for a service that was never performed. In some cases, the car is deliberately damaged to increase the claim amount. Thus resulting in higher premiums for policyholders and financial losses for insurance companies.

Ways to avoid false repair shops -

• Be present during the inspection and repair process to ensure transparency.
• Choose reputable and accredited repair shops recommended by your insurance company.
• Request a detailed breakdown of repair costs and services before authorising any work.

Fake insurance policies

A pretty easy way to scam an applicant is by selling them completely fake insurance policies, leaving the policyholder without any coverage. Like genuine policies, these fake policies often come with forged documents that appear legitimate. Victims typically find out about the scam when they try to make a claim and the insurance company has no record of their policy.

Ways to avoid fake insurance policies -

• Always verify the policy details and the insurance company’s registration with the Insurance Commission.
• Purchase insurance from well-known and trusted insurance companies.
• Be skeptical of unusually low premiums and question the agent's pressure to buy immediately.

Identity theft

Yes, identity theft scam takes place in the auto insurance area as well. Here the scamster steals your personal information to purchase policies or file claims. This could lead to unauthorized claims, policy cancellations, and legal issues for the victim.

Ways to avoid identity theft -

• Report any suspicious activities to your insurance company and the authorities immediately.
• Protect your personal information and share it only with trusted individuals/entities.
• Regularly monitor your insurance accounts and statements for any unauthorised activities.

Protection from car insurance scam

A car owner or a prospective car insurance applicant can avoid falling victim to scams by being proactive and cautious. Here are a few tips to protect yourself from falling prey to such unfortunate events -

Through research before buying

Always research the insurance company and agent before purchasing a policy. Do check online reviews, customer feedback, and verify their registration with the Insurance Commission.

Understand the policies terms & conditions

It is advisable to thoroughly read and understand your insurance policy, including the coverage, terms, and conditions. Don’t hesitate to ask questions if something is unclear.

Go for a secured mode of payment

Make sure to make payments through secure and traceable methods. Avoid cash transactions and opt for bank transfers or credit card payments.
Maintain full and clear records

All communications, transactions, and documents related to your insurance policy must be maintained and recorded by the applicant. When needed, these records can serve as evidence in case of disputes or fraud.

Report suspected scams

In case an applicant suspects he/she has fallen victim to a car insurance scam, they should immediately report it to the insurance company and the Insurance Commission (IC). Prompt reporting can help prevent further fraudulent activities and assist in investigations.

Role of the Insurance Commission (IC)

In the Philippines, the Insurance Commission plays a crucial role in regulating and supervising insurance companies, thus ensuring fair operation and transparency. It also handles complaints and investigates fraudulent activities within the insurance industry.

Here are a few ways in which the IC helps keep the insurance arena in the Philippines clear from scamsters -

Verification: IC has strict rules regarding the verification of an insurance company’s and agents' legitimacy, thus providing peace to the policyholders.

Complaints: Concerned policyholders can file complaints with the IC if they encounter issues with their insurance company or suspect fraud.

Regulation: IC enforces regulations on the insurance companies operating in the country which they must follow. Thus, promoting transparency and accountability within the industry.

Know the potential signs of a car insurance scam

There are certain red flags that a prospective applicant must look out for when buying an auto insurance policy. This will help them identify potential scams and stay protected from any financial loss. So, always be cautious of the following -

Unusually low premiums

Be cautious of car insurance policies offered at significantly lower prices than the market rate.

Lack of documentation

Legitimate insurance companies provide detailed documentation for policies and transactions which is not the case with a scam.

High-pressure sales tactics

Scammers often use high-pressure tactics to force applicants into making quick decisions.

Suspicious repair shops

Beware of repair shops that push for unnecessary repairs or refuse to provide detailed estimates.

Unregistered agents

If an insurance agent fails to verify his/her registration with the Insurance Commission it is a red flag.

Conclusion

There is no doubt that car insurance is essential for protecting a car owner and the vehicle from financial loss. However, the existence of car insurance scams in the Philippines necessitates full caution and awareness on the part of the applicant. This can be done via understanding the common scams and recognizing the common red flags. By taking protective measures, one can easily safeguard against fraudulent activities. It is advisable to verify the authenticity of insurance agents and companies, understand your policy, and report any suspicious activities to the Insurance Commission.

Also Read: Understanding car insurance cost in the Philippines in 2024