Why New Jerseyans may unknowingly be driving around with invalid auto insurance policies
Imagine you get into a car accident.
You pull over. Fortunately, no one appears to be injured.
The police arrive. The officer takes your license, registration and insurance card, and after all the information is recorded, you go on your way.
Days later, you learn your insurance policy was a fake.
For a routine traffic stop, officers won't typically check the validity of an insurance card. But when your insurance information becomes part of a police report, the policy's authenticity will be confirmed.
That's why it often takes a traffic accident for drivers to learn they've been had. That the insurance policies they spent hundreds of dollars to buy aren't valid. That they've been driving without insurance for months.
These drivers unknowingly purchased fraudulent insurance policies from scammers, and the coverage isn't worth the paper it's printed on.
It's a huge problem in Michigan, where earlier this year, a one-day spot check of drivers revealed 16 percent had invalid or fake insurance cards.
Crooks pretending to be insurance agents have flooded the state, mostly in urban areas, offering cheaper-than-average auto policies. Policies that turn out to be bogus.
One of the reasons Michigan is ripe for this kind of fraud is its high car insurance rates.
But it's not the most expensive state in the country. New Jersey is.
According to the National Association of Insurance Commissioners, in 2012, the most recent data available, the average policy in New Jersey costs $1,334.54. That compares to a national average of $927.58.
With such high rates, drivers are often looking for a way to pay lower premiums.
So scammers, like the ones in Michigan, could be out to hit New Jerseyans.
New Jersey law is pretty strict on the offense.
Driving with a fake insurance policy, whether you're the victim of a scam or not, carries penalties that are on par with, and sometimes harsher than, a drunk driving offense.
We went over the specifics with Anthony Vignier, a Kearny-based consumer law attorney.
Under the New Jersey Compulsory Motor Vehicle Insurance Law (N.J.S.A. 39:6B-1), a first-time offender will face a fine of between $300 and $1,000, MVC surcharges of $250 a year for three years, a period of community service to be determined by the court and a mandatory license suspension of one year. The license suspension can be reduced or eliminated if the driver shows proof of valid insurance at the time of the hearing.
A second violation will give you a fine of up to $5,000, 14 days of mandatory jail time, 30 days of community service and a two-year license suspension, plus the MVC surcharges.
Compare that to a drunk driving charge, which typically leads to and fees and fines under $500, depending on the offense and the effectiveness of the violator's attorney, a three-year $1,000 MVC surcharge, and license suspension of between three and 12 months, depending on the driver's blood alcohol level. A second offense would carry a license suspension of two years, community service and fines up to $1,000. A third offense would mean a 10-year license suspension, a fine of $1,000 and a minimum sentence of 180 days.
The consequences could go far beyond these violations.
Those who drive without valid insurance will have their car impounded, and it will cost hundreds of dollars to have the car released. Unlike Michigan, New Jersey doesn't seize the vehicle.
Then you'll have to pay all over again to get real insurance to replace the phony policy.
And worse: if you're in an accident that causes serious injuries, and you have no insurance coverage, there will be medical bills and property claims to pay.
Think of the lawsuits.
It's a fast path to financial ruin.
There's no sympathy for those who intentionally drive with insurance, but imagine facing all this because you're the victim of a fake insurance policy scam?
BEHIND THE SCAM
Crooks shop around for new victims in many ways.
Some cruise car dealership lots and outside MVC offices, looking for someone about to buy, or who has just bought a car. Others advertise in newspapers and on web sites. Still others actually set up a phony office. They present business cards using the logos of real car insurance companies or sham insurance broker firms.
When a potential victim is hooked, the salesperson goes to work.
"While there are many different types of fraud, in many cases, fraudsters act as sham insurance agents and set up real insurance policies for unsuspecting consumers with invalid forms of payment that cause the policies to be cancelled for non-payment," said Jeff Sibel, a spokesman for Progressive Group of Insurance Companies, one of the firms targeted by scammers in Michigan.
He said it's difficult for companies to detect this type of fraud because the down payment and the policy information appear to be valid.
Take cautions to make sure the auto insurance policy you're buying is the real thing. "The bogus seller, who is in no way affiliated with Progressive or licensed to sell insurance, then walks away with the money in their pocket and the consumer is left hanging," Sibel said.
James Quiggle of the Coalition Against Insurance Fraud called fake auto coverage "an expensive speed trap."
"Simply jumping at the lowest price peddled by a stranger can cause large fines, loss of your license and impounding of your vehicle," Quiggle said. "You might spend weeks regaining your ability to live normally -- drive to work, take the kids to school or see your doctor."
He said if an agent appears out of nowhere, cold calls or emails hawking super low-priced coverage, it's a warning signal. And you should absolutely back off if the agent demands cash or a money order upfront.
"An auto premium that's well below the going rate for no obvious reason should set off alarm bells for a driver," Quiggle said. "Why would coverage from a nationally-known insurer suddenly drop well below what other insurers are quoting, or what your neighbors say they're paying?"
Companies do have different underwriting practices, so it is always smart to shop around and get quotes from several carriers, said Marshall McKnight, a spokesman for the state's Department of Banking and Insurance. "If there is a dramatic difference in premium pricing, it may be due to coverage offered, or in some cases, fraud."
To make sure you're working with a real agent, ask for copies of the agent's and the insurance agency's license.
Next, verify. Contact the state's Department of Banking and Insurance at 609-292-7272. You can check that agents are licensed here, and you can check on the licensing of insurance companies here.
Don't be fooled by realistic-looking policy applications, insurance policies and proof-of-insurance cards, Quiggle said. Fakes are easy to counterfeit.
Once you have a "policy" in your hands, check the policy wording and look for obvious misspellings and typos.
Then contact the insurer to confirm the policy independently, he said.
"Unless you receive a policy declaration from the insurer within a few days, you may have been scammed," Quiggle said.
If you think you're the victim of insurance fraud or you know about a fraud you'd like to report, call the Bureau of Fraud Deterrence at 609-292-7272, extension 51088, or email NJInsuranceFraud@njdcj.org.
You can also file a complaint against a New Jersey insurance licensee.
Progressive asks that anyone with concerns about one if its policies call 1-800-PROGRESSIVE. Call the same number if you want to verify that an agent is currently licensed to sell the company's policies.
Have you been Bamboozled? Reach Karin Price Mueller at Bamboozled@NJAdvanceMedia.com. Follow her on Twitter @KPMueller. Find Bamboozled on Facebook. Mueller is also the founder of NJMoneyHelp.com.