While it is perhaps too early to determine the amount of insurance fraud that may be initiated by the current economic crisis, with unemployment skyrocketing and businesses shuttering, we will certainly see a spike in low-tiered insurance fraud scams that in the aggregate will be very substantial. It is estimated that insurance companies will refund or credit drivers more than $6.5 billion over the next two months, based on the insurers’ purported savings from the drastic reduction in automobile accident claims as a result of far fewer cars on the road due to state mandated stay-at-home precautions.1 However, less accidents does not necessarily equate to less claims.

Following the 2008 recession, insurance companies across the country reported an increase in vehicle give-ups. This type of fraud occurs when the owner alleges that a vehicle theft has taken place, but in truth the owner disposed of the vehicle by abandoning it, giving it away, or burning it, and then reporting that it was stolen. According to National Insurance Crime Bureau, give-ups of this nature increased by 24% in 2009, compared to 2008, suggesting that it was attributable to increased financial pressure.2

Since then, heavier restrictions were placed on mortgages to prevent people from taking out a home loan unless they were clearly able make the monthly payments. There are, however, fewer restrictions on auto loans.3

Indeed, ten years later, 85% of all new vehicles purchased, have been financed.4 Shortly before the World Health Organization deemed COVID-19 a pandemic, the automotive industry had more than $1.2 trillion in total outstanding loan balances. According to the Federal Reserve Bank of New York, approximately seven million Americans were 90 days or more behind on their auto loan payments before the outbreak.5

“If you think nobody cares if you’re alive, try missing a couple of car payments.” -Earl Wilson

 In the wake of the current financial crisis, many Americans will be hard pressed to catch up or make loan payments, prompting them to literally give-up for a way out. According to the Coalition Against Insurance Fraud, most adult Americans say they are concerned about fraud to a degree. However, the percentage has dropped in recent years, suggesting that Americans are able to justify this type of behavior.

  • 78% of Adult Americans say they are concerned about insurance fraud.
  • 88% say it’s unethical to misrepresent an incident to obtain payment for an uncovered loss, compared to 93% in 1997.
  • 84% say submitting an inflated claim is unethical, compared to 91% in 1997.6

As such, in the coming months and year, insurance companies across the country should expect the percentage to further drop, with an increase in vehicle give-ups, and false claims.

In anticipation of this onslaught, insurers should put an emphasis on the vetting of suspicious cases, and should increase, rather than decrease the amount of its investigators. Indeed, in the wake of the 2008 recession, many insurers were caught off guard by an excess amount of fraudulent claims because in response to a collapsing economy, insurers reduced the number of its investigators.

In these strange times, however, the issue exists of how insurance fraud investigations will be conducted. With many states now allowing oaths to be administered remotely, examinations under oath can be conducted via Zoom or Skype.


Patricia Sabatini, “Consumer groups push for more auto insurance refunds as millions of motorists sit at home” Pittsburgh Post-Gazette, April 14, 2020

Jessica Ramirez, “New Insurance Fraud: Owners Dump Cars Creatively” Newsweek, June 17, 2009 (https://www.newsweek.com/new-insurance-fraud-owners-dump-cars-creatively-80763)

Heather Long, “A record 7 million Americans are 3 months behind on their car payments, a red flag for the economy” The Washington Post, February 12, 2019 (https://www.washingtonpost.com/business/2019/02/12/record-million-americans-are-months-behind-their-car-payments-red-flag-economy/)

Matt Tatham, “Auto Loan Debt Sets Record Highs” July 18, 2019 (https://www.experian.com/blogs/ask-experian/research/auto-loan-debt-study/)