Auto insurance can raise the average driver’s yearly insurance premium by up to $300, according to the National Insurance Crime Bureau. That amount may seem significant, but it is minor compared to the overall impact of insurance fraud. When fraudulent acts raise a business’ insurance rate, that business must charge more for products and services.
Forms Of Insurance Fraud
Insurance fraud is usually classed as either soft or hard. In a hard fraud case, an accident is created. These phony accidents, false injury claims and intentional abandonments all raise insurance rates, but staged accidents are the most dangerous form of fraud. Even if a victim isn’t at fault, premiums can rise and the best insurance coverage can be dropped.
In a soft fraud case, policyholders pad otherwise legitimate claims. Car owners can add damage to claims, or collude with body shops and insurance adjusters to inflate repair estimates. In some cases, drivers seek unnecessary treatment from unethical doctors, which can raise the cost of the best insurance coverage.
Fighting Insurance Fraud
America’s insurance companies have been Protecting what matters most since 1984, and they have assembled investigative units to work against fraud, and many states have regulations against it. While these approaches help, they can adversely affect those who file claims. A claim that’s flagged as fraudulent may be more difficult to settle, and a policyholder can wait months for reimbursement. If a policyholder is unjustly denied compensation, he or she can file a lawsuit.
The Cost To Drivers
Fraud and tax evasion are the most costly crimes in white-collar America, and the auto insurance fraud issue is very common. Almost one quarter of personal injury claims and a tenth of property damage claims are potentially fraudulent, according to insurance industry experts. The cost adds up, and insurers pay billions in fraudulent claims each year.
As high as these estimates are, none of them factor in the other costs of insurance fraud. It puts significant strain on the justice system, emergency services, law enforcement and businesses. While insurance fraud may seem like a victimless crime, its real cost is much higher than anyone can imagine.
