What's The Price Of Fraud?

By Author: Marcus Stalder
Total Articles: 491
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It's quite common to see people describe some crimes as victimless. The idea that no one suffers is used to justify arguing for decriminalization. So, for example, taking a soft drug like cannabis is not supposed to hurt anyone. Indeed, if you read the right medical reports, it's actually good for relieving pain. Put all this together and you have a lobby for allowing people to smoke or make tea out of the drug. Better still, states can tax the sales to help reduce the deficits. No matter whether this is right, you also hear the same type of argument about crimes against large corporations like insurance companies. Many suggest there are no individual victims, that large companies can afford a level of fraud without stockholders losing their dividends. Put the other way round, it's very rare to see any senior executives facing criminal charges for defrauding their own company. Interestingly, many of the trials have actually resulted in not guilty verdicts as juries have failed to agree senior executives are sufficiently dishonest even though they have benefitted financially from their activities. Even attempts to hold fraudsters ...
... liable in the civil courts have run into trouble.

All this would be wonderful except for one unfortunate fact when it comes to insurance companies. The actuaries sit down and calculate the risk that ordinary drivers will be involved in accidents. They have decades of data from which to calculate the amounts likely to be claimed. The estimate is then divided among all the policyholders as the premium. Now let's say hundreds of criminals come forward and stage accidents involving claims for tens of thousands of dollars. Some of the accidents are between two vehicles used by the criminals. On other occasions, they ram into vehicles driven by innocent drivers. Earlier this year, the Insurance Information Institute issued a report on the problem. One of the worst affected states is Florida. This is because of its no-fault laws which reduce the need to test the reliability of the evidence the collision is real. In 2010, it's estimated Florida drivers paid an extra $50 on their insurances rates to cover the fake claims.

Indeed, this has become sufficiently profitable that some criminal gangs are now turning to this type of fraud on a professional basis. They are setting up clinics to front the claims for treatment and recruiting attorneys or paralegals prepared to handle the claims. One of the symptoms of this behavior is some Floridians have been involved in a very bad run of accidents over the last few years. With only a small number of people to call on to act as claimants, it's increasingly possible to filter out the suspect claims. But, until the law enforcement agencies make this type of crime more of a priority, there's little chance of keeping a lid on the problem. So we should all make this a political issue. Politicians in all the states where this is shown to be a problem should be told their re-election depends on them giving more funding to police this problem. Unless you do this, your car insurance quotes will keep rising year on year. If costs are to be contained and car insurance rates stabilized, effective policing is required.