The insurance companies are apprehensive about nixing this practice, as the dealerships are a bulk source of premiums.

The following was recently shared with other enthusiasts.

I wish to inform Team BHP about insurance malpractices that have been seen mostly in mass-market cars.

When a customer approaches a dealer workshop for insurance repair work, the following things happen:

• The dealership makes the owner sign some blank forms (pertaining to insurance formalities).
• The repair invoice is raised in the name of the insurance company and the insurance company pays the claim amount directly to the dealer workshop.
• Insurance policies have a policy excess of Rs 1,000. For nil depreciation policies, irrespective of the claim amount, the customer needs to pay only Rs. 1000 and a nominal amount for any consumables.

Scam 1 (Without customer knowledge):

A customer comes to the dealer workshop for a genuine repair of a dent/ding.

Eg: The actual damage occurred when the owner brushed the right front door of the car against a tight parking space. The owner goes to the workshop. Once the owner leaves the premises, the workshop guys artfully extend the damage to the rear right door and if possible the entire right portion of the car. Since they have the blank forms, they get to fill up the cause of accident column to include the manipulated damage as well.

Scam 2 (Customer induced to make an insurance claim):

The customer comes to a dealer service centre for routine service. Almost all cars will have minor scratches. Workshop executive convinces the customer that all minor scratches will be removed for a nominal payment. Once the poor gullible customer falls into the trap, the workshop repeats scenario 1. I.e., get a bunch of blank forms signed and makes a few more dents near the scratches without the knowledge of the customer and claims insurance.

Scam 3 (Customer and dealer workshop collude):

Eg: The actual damage occurred when the owner brushed the right front door of the car against a tight parking space. The owner goes to the workshop.

Now workshop executive pitches in that once the front door is repainted there will be a paint shade mismatch when compared to the rear door (probably because the car has been exposed to weather elements and the paint shade might have become faded). Also, the workshop executive agrees to take care of any minor scratches in the car without charging any extra amount. Once the customer agrees, the workshop damages the rear right door and if possible the entire right portion of the car. Since they have the blank forms, they fill up the cause of accident column to include the manipulated damage as well.

Now coming to the crux of the issue:

All the stakeholders – i.e., the insurance company as well as the surveyors are aware of this practice. The insurance companies are apprehensive about nixing this practice, as the dealerships are a bulk source of premiums. Antagonizing dealerships will result in the insurance companies losing a bulk amount of premiums. As long as the overall business portfolio is profitable, insurance companies don’t care about these manipulated and fraudulent claims. The independent surveyors are dependent on the insurance company for their income, they too turn into unwilling accomplices. If the dealer insurance portfolio becomes non-profitable, insurance companies cheerfully hike the premiums.

The employees at the dealership have a very low fixed salary. The rest of the salary depends on the revenue generated in the workshop. Once the workshop target is achieved the employees get monetary incentives. Hence they too become enthusiastic participants in this game

Now let’s see how this affects the unwitting customer in the long run (especially the car owners in scenarios 1 and 2):

• Short term impact: All customers have to deal with increased insurance premiums because dealers and some unscrupulous car owners are gaming the system.
• Long term impact: Any and all repair work records done on a vehicle, especially at OEM dealer workshops are easily available for verification when selling the vehicle. When the customer tries to sell the vehicle, all these repair work history will significantly reduce the resale value.

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