Suspicious auto insurance claims skyrocket, premiums rise too

suspicious auto insurance claims skyrocketElaborate auto insurance scams have led to a 46% increase in the number of suspicious claims submitted to insurers the last two years, says a study by the National Insurance Crime Bureau.

In its latest report, NICB says staged accidents, a popular form of car insurance fraud, are targeting innocent drivers with increasingly bold schemes that may be hard to detect. Common maneuvers include luring motorists into crashes, crashing the scammers' own cars against each other, and fabricating fictitious "paper" accidents. They also often involve phony passengers who file additional claims and unethical medical providers who prescribe expensive treatments for non-existent injuries.

"Criminals have gone from stealing cars to the medical side of the insurance business because there's quicker money and a lesser chance of getting caught," said Roger Morris, a spokesman for the NICB, a non-profit set up by the insurance industry to work with law enforcement. "Fraud does have an impact on insurance rates," he said.

According to newly-released data by the Insurance Information Institute, that impact works out to about $1,561 per claim in New York, one of 12 states with no-fault auto insurance laws. Such laws allow policyholders to recover financial losses from their insurance company, regardless of fault, and further embolden scammers. About one in five "no-fault" claims is fraudulent.

But a staged accident insurance claim resulting in a payout to all the victims, including medical and legal expenses, can average between $80k to $100k, said Morris. "It's a very lucrative business and sophisticated rings are perpetrating these scams. In states with no-fault laws, they have a pretty good chance of getting away with things."

Car insurance rates have gone up 4.3% in the first quarter of 2010, accounting for a total increase of 24% in the last three years.

The NICB's research also shows a correlation between the number of injury claims and that of questionable claims filed by purported victims. While the overall number of injury claims has declined by 17.1% from 2007 through 2009, the number of such claims resulting from suspected staged accidents has climbed by 46% over the same period.

The five states that generated the most bogus claims related to staged accidents, according to the NICB, were Florida, New York, California, Texas, and Illinois. The top five cities were New York City, Tampa, Miami, Orlando, and Houston.

The Coalition Against Insurance Fraud, an insurance industry watchdog, explains those statistics with the fact that urban areas have high traffic volumes that make large numbers of injury claims more plausible. Big cities also offer more easily-available recruits for scams and more opportunities for low-speed crashes.

To avoid becoming a victim behind the wheel, be sure to maintain enough distance between your vehicle and the one in front of it. In a "sudden stop" maneuver, scammers will suddenly stop their car, causing you to rear-end them. In the case of an accident, call the police and get a report accompanied by the officer's name and a description of the damages. With an exact description, it's harder for criminals to magnify the damage later and try to claim a larger premium. Use your cell phone camera or a disposable one to document the scene after an accident, and avoid "runners" and "cappers" who materialize suddenly and try to direct you to doctors and attorneys.
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