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Car insurance fraud hurts carriers and clients

Many shake their heads every time they pay a car insurance bill. This may explain why there is an estimated $29 billion in insurance fraud committed by one in 10 drivers on the road each year. These acts could be strategic omissions of little things like a speeding ticket from three years ago or adding a false claim of whiplash if the policyholder was in a car crash. This is rationalized as one person sticking it just a little bit to some giant corporation that is “paid for doing nothing,” but there are also claimants out there engaged in criminal behavior.

What people do not realize is that every car insurance policy accounts for this behavior by adding an extra $200-$300 each year to the price of the policy. Moreover, this is far from a victim-less crime because it slows down the process for insurance claims, takes money out of a state’s budget and can put innocent people in danger.

Typical examples of fraud

The fraud occurs when the client knowingly deceives the carrier in some way to escalate the value of the claim to get more money from the company or pay lower premiums. Common examples include:

  • Inflated amount of vehicle losses
  • Intentionally setting one’s vehicle on fire to collect a total loss
  • Adding more damage to the vehicle after the accident to increase the claim amount
  • Inflated or fake bills for repairs or medical treatment
  • Fraudulently reporting a vehicle as stolen
  • Fake medical disability claim
  • Faked death or severe injury
  • Providing false information or omitting information on the application to lower the premium
  • Staged vehicle crashes, sometimes endangering innocent motorists

California a hot spot for auto insurance fraud

The National Insurance Crime Bureau (NICB) reports that California is near the top of the list for the number of fraudulent auto insurance claims. However, the bill AB1679 is strengthening laws that are already used to convict more insurance swindlers than any other state. Ideally, this will help keep premiums down for the honest policyholders, but it also holds fraudsters accountable through restitution or conviction of a crime.

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