The Reality of Insurance Fraud and How it Affects You
It is an unfortunate reality that insurance companies who insure millions of vehicles each year are forced to pay out so much money in fraudulent claims and convictions for car insurance fraud that it impacts everyone's premiums.
Auto insurance fraud is a serious crime with very real consequences. Fraud of this nature typically falls into two distinct categories: hard fraud and soft fraud.
Types of Insurance Fraud
Insurance fraud happens when a person or group knowingly inflicts damage on their own vehicle by staging an accident or planning an event so that it looks authentic. If it is successful, the insurance company pays out the damages. This type of fraud–called hard fraud–encompasses swoop and squat, sideswipe, wave-in and hit and run scams, arson fraud, car theft fraud and other subtler means of defrauding the insurance system.
Soft fraud occurs when legitimate claimants attempt to get a higher payout by exaggerating damages to themselves or their vehicle. In both cases, the goal is to take an amount of money from the insurer that the claimant is not entitled to. Insurance fraud is a crime, and there are serious consequences for people when they are caught in the act.
Consequences of Insurance Fraud
Regardless of which type a person commits, there are serious consequences to pay if discovered. If you are deemed guilty of soft fraud by exaggerating medical claims or damage to your automobile, at the very least you can expect high premiums in the future. You will likely be dropped by your insurance company, and any other company that agrees to insure you will demand high rates because of your history. In addition, the insurance company may file a lawsuit against you. If found guilty in a civil court, you will be liable for the amount you defrauded the company for, theirs and your legal fees and any other penalty the court sees fit to impose.
By contrast, hard fraud can lead to a criminal conviction. Organized crime rings are often behind hard fraud schemes but even if that is not the case, you can expect to be hit with a fine. Paying a fine, however, may be the least of your worries. A criminal conviction is possible and if you have a history, you may end up going to jail.
Insurance fraud can lead to serious consequences, even if your only offense was attempting to increase the size of your insurance settlement by exaggerating the extent of the damages. It is important to know that insurance companies have dealt with every trick in the book when it comes to insurance fraud, so they will investigate any questionable claim to the utmost degree.
Why People File Fraudulent Cases
The most frequent types of insurance fraud are the staged accidental injury types that involve medical payments. The number of insurance fraud cases that are manufactured each and every year are staggering. The cost of these criminal activities per insurance company reports range from 2.5 million per state to well over 2 billion for the United States. There countless variations for each of these major groups of false insurance claims and new, even more high-tech variations are being added every day. The increase in the number of these false claims and the subsequent convictions that follow are the main reasons for the rise in premiums across the board for all insurers.
The Anatomy of a Staged Claim
Here is an example from idea to filed claim that describes exactly the steps taken to pull off a false insurance accident claim. First, you have to realize that these accidents are staged. The insured individuals religiously rehearse how it's going to happen in order to create new and different ways of theft.
One of the ways that they stage an accident is to have a car veer in front of you, so that you slam on your brakes, thus causing a rear end accident. This is usually made worse than it really was by having yet another vehicle slam into the back of you. The third-party vehicle that seemingly is an innocent party that just happened to be in the wrong place at the wrong time serves another role and that is to report the accident the way they saw it to the police. The claim is then filed and the injuries that have all been created by the accident victims are filed and now all that is left is to seal the hard fraud case and cash the check.
How a Conviction Raises the Rates for All
The insurance companies of the United States are forced to cover these fraudulent insurance claims and the only way to do this is to raise the premiums across the board. The unfairness of this punishment being placed on the heads of every automobile insurance policy is the depressing aspect of insurance fraud. To summarize what the end result is for you the insured is that your rates are raised and the false claims keep coming in.