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Home / Auto / The True Cost of Auto Insurance Fraud

The True Cost of Auto Insurance Fraud


Insurance coverage fraud is just not merely the act of individuals profiting from a faceless company, because the ethically challenged could declare. It prices all People by means of elevated premiums, and it might probably take a a lot worse toll in some circumstances – even probably leading to dying.

Auto Insurance coverage Fraud Is on the Rise

Based on the Nationwide Insurance coverage Crime Bureau (NICB), auto insurance is the best element of total insurance fraud. Within the 2013 NICB report, suspected circumstances of auto insurance fraud rose 12.7% from 2011 to 2012, reaching a nationwide complete of 78,024. This raised the three-year complete from 2010 to 2012 to over 209,000 questionable claims (QCs).

To place this in perspective, auto-related QCs throughout 2012 have been over 4 and a half occasions extra prevalent than the subsequent highest class (17,183 house owner’s private property QCs) and virtually seventeen and a half occasions greater than the third place class (staff compensation, together with employer’s liability).

Research estimate virtually 25% of the bodily harm claims associated to auto crashes are bogus. Property and casualty claims towards auto insurance should not a lot better, coming in at round a 10% fraud price.

The NICB estimates the direct value to you at round $200-$300 per 12 months additional tacked onto your premium. The oblique prices are prone to be excess of that, estimated at round $1,000 per household in keeping with the Texas Division of Insurance coverage.

The oblique prices should not all the time apparent, however they’re important. For instance, some portion of the costs you pay for items and providers is dedicated to protecting the inflated insurance prices of the enterprise – and for fraud schemes, companies are much more tempting targets than people.

Estimates fluctuate on the general value, however the Coalition In opposition to Insurance coverage Fraud places the price of fraudulent claims within the vary of $80 billion yearly. Claims are likely to rise throughout tough financial occasions, and the latest recession was no totally different.

Varieties of Fraudulent Claims

What’s the nature of all of those bogus claims? Auto insurance fraud is usually damaged into two classifications – “laborious” and “smooth”.

Arduous fraud happens when an insurable occasion is both staged or fabricated outright. This consists of scams equivalent to phony hit and run accidents, triggered rear-end collisions, and pretend automobile thefts.

Gentle fraud refers to inflating a official declare to cover nonexistent or unrelated fees. Examples embrace claiming harm from a earlier occasion or racking up unjustified medical bills claiming the wreck was at fault. Underwriting fraud, or misrepresenting your insurance info to decrease your premiums, might also be thought-about a type of smooth fraud.

The Auxiliary Risks

Within the case of auto insurance fraud, laborious fraud is on a big enhance and staged accidents account for the best a part of it. Staged accidents usually contain harmless individuals who occur to be within the fallacious place on the fallacious time and get inadvertently caught up in a staged collision or a subsequent chain response.

There have been a number of circumstances of accidents and deaths from staged accidents that spiral uncontrolled, and other people have been efficiently prosecuted because of this. Sadly, that doesn’t convey again the deceased or heal the disabled.

Assist Cease Auto Insurance coverage Fraud

For those who suspect auto insurance fraud, or every other sort of insurance fraud, the has a toll-free hotline (1-800-835-6422 or 1-800 TEL-NICB) which you could name to report the fraud anonymously for additional investigation. We hope that you just by no means end up on this state of affairs – however in the event you do, please be a part of the answer and never a part of the issue.

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