An Iraqi asylum seeker allegedly staged a minibus crash to rip off insurance companies by $1.2 million.

Thamer Ari, 35, was arrested on Tuesday after allegedly providing a group of refugees he met at Christmas Island Detention Centre to be the bus' passengers in the May 2015 crash at a Liverpool intersection,The Daily Telegraph reported.

Police last year launched a crack down in fraudulent car insurance claims, which are believed to be increasing premiums for drivers by up to $200 a year.

The scam is believed to be led by Vietnamese and Afghan refugees, who make claims on minor or fake crashes in an attempt to win payouts from insurers. The scams are thought to be costing up to $400 million a year.

Ari is facing 17 charges of dishonesty obtaining financial advantage and his lawyer told the court he should be granted bail due to health complications.

Thamer Ari, 35, was arrested on Tuesday after allegedly providing a group of refugees he met on Christmas Island (pictured) to be the bus' passengers in the May 2015 crash

Ari's co-accused Haidar Al Jeezai (pictured) allegedly tried to lodge the personal injury claims

The lawyer said his family, including his seven children, would not leave Australia if he were released on bail as they were on bridging visas and were scared to go back to Iraq.

But Magistrate Imad Abdul-Karim denied the request, saying Ari could speak with other witnesses if released, according to The Daily Telegraph.

Police prosecutor Sergeant Rickard told the court the refugee passengers on the bus were 'certainly' on Christmas Island with Ari and are 'complicit'.

Police prosecutor Sergeant Rickard told the court the refugee passengers on the bus were 'certainly' on Christmas Island with Ari and are 'complicit'

Police last year launched a crack down on fraudulent car insurance claims, which are believed to be increasing premiums for drivers by up to $200 a year. Pictured, police salvaging a car in an unrelated matter believed to be involved in a scam

'They were certainly in Christmas Island with him, they were certainly on the bus with him,' he said.

The minibus collided with a Toyota Kluger at the Liverpool intersection in 2015 to allegedly scam $1.2 million worth of personal injury claims.

Ari's co-accused Haidar Al Jeezai allegedly tried to lodge the claims, but they were unsuccessful.