The Rise of Blacklisted Garages in Insurance Fraud

What are Blacklisted Garages?

As the name suggests, blacklisted garages are those mechanics or repair shops that have been identified by insurance companies for engaging in fraudulent activities such as:

• Inflating Repair Costs: Generating a bill that is higher than the actual repair cost.
• Collusion with Claim Verifiers: Many garages also work in collusion with claim verifiers to get an easy approval.
• Replacement of Genuine Parts: Replacing the genuine parts of the vehicle with counterfeit, quality parts while charging for genuine parts.
• Raising Multiple Claims: Some cases have been reported where garages raise multiple claims from different insurance providers for the same incident.
• Staging Damage: Creating or staging damage solely to obtain a settlement amount.

Once a garage has been blacklisted, the insurance company does not settle any claims linked with the respective garage. This step not only protects the insurance company but also genuine policyholders who, just like Shikha Sharma, unknowingly trust such garages.

Impact on Insurance Provider

The rise of such fraudulent practices by garages has become a challenge for insurance providers. From financial loss to changes in reputation damage, here’s how such practices impact insurance providers:

Financial Loss

Inflated bills, staged damage, multiple claims, and the use of counterfeit parts are all resulting in heavy financial losses faced by insurance providers.

Higher Number of Claims

Insurance providers, despite being capable, can face a major challenge due to the increased number of claims. With the rise in fraudulent claims, the claim settlement ratio of insurance companies is affected negatively.

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Reviewing the Network

Insurance companies now have to run a fresh review of their network garages, which can take a toll on their human resource and finances.

Damage to Reputation

Rejection of such claims raised by genuine policyholders creates mistrust in the market and damages the insurer’s reputation. This is a significant issue for the insurance realm, as it relies heavily on trust and a good reputation.

Impact on Policyholders

Garages involved in malpractices can be demotivating for genuine car insurance policyholders. Here’s how policyholders are suffering:

Stricter Claim Verification

Due to the rise in fraudulent claims by garages, many insurance companies have made their claim verification stricter. Policyholders may have to endure a lengthy documentation process and wait for claim settlement.

Rejection of Claims

Just like Shikha Sharma, many genuine policyholders may unknowingly trust a fraudulent garage. In such situations, their claims can get rejected without any fault of their own.

Increase in Premium Cost

To offset the financial losses incurred by insurance companies due to fraudulent claims, many are reviewing their networks, implementing stricter verification, and may increase premium costs for the same coverage in the future.

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What Can Policyholders Do?

Due to the rise in fraudulent claims, many insurance companies are urging policyholders to be more diligent with their claims. Here are some practical tips to bear in mind:

1. Verify the network garage list of the respective insurance company before getting a repair or service.
2. Choose only reputed car insurance companies that offer cashless claim settlement.
3. Check the bill provided by the garage carefully to avoid inflated costs.
4. Read the policy document carefully to understand how such claim settlement works.
5. Report a garage you find to be indulging in such fraudulent practices.

How Insurance Providers are Dealing with Such Challenges

To curb the challenges faced due to fraudulent claims, insurance companies are taking some crucial steps, such as:

1. Immediately blacklisting a garage that is found to be indulging in fraudulent and malpractices.
2. Creating a centralised database of blacklisted garages that every insurance company and policyholder can verify.
3. Smarter and stricter analysis verification of garages before including them in the network.
4. Smart assessment of claims using AI-driven tools and image-based assessment during the verification process.

Summing Up

The rise of fraudulent claims has become a challenge for every insurance company, leading to huge financial losses across the board. However, with measures such as blacklisting garages, stricter audits and AI-driven monitoring, Insurance providers can combat such issues. Similarly, with slightly more diligence, even policyholders can avoid getting their claims rejected.

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