What Does Auto Insurance Fraud Have To Do With Premium Hikes?

By Author: Elle Perkins
Total Articles: 36
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The Ponzi-like scam allegedly done by finance manager Bernie Madoff, leaving many Americans blown off of their hard-earned savings, and even forcing those on retirement to find work, is perhaps the biggest fraud problem the United States is faced with today. But perhaps one that tails second to it, and has been going on for quite some time is auto insurance fraud.

In Hawaii alone, the Insurance Fraud Investigation Unit of the Hawaii State Department of Commerce and Consumer Affairs came out with a report of a 61 percent increase in criminal convictions for motor vehicle insurance fraud for the past year compared to 2007, according to the DCCA.

Examples of Hawaii insurance fraud cases in 2008 include charges involving a typical resident, a body shop owner, and a career criminal.

One claimed inability to work due to auto accident injuries. This person claimed fictitious employers and created a post office box address which made her intercept all correspondence. Three different insurance companies were defrauded using this modus operandi by the same person. In January 2008, this person was sentenced ...
... to 30 days in jail and was also ordered to pay restitution totaling more than $103,000 along with court fees in the amount of $1380.00.

A body shop owner meanwhile did not contest a decision by the court of him defrauding an insurance company. He claimed and was given compensation for safety and structural repairs that was not performed. He was ordered to pay restitution amounting to US$4,000 and a $1,500 fine on top of a five-year probationary period.

In another insurance fraud case, the convicted defrauder got insurance coverage after being involved in a three-car accident. She reported a false date of accident in an attempt to have her insurance company pay for the damages. In November 2008, she was ordered to serve a five-year prison term for attempting to obtain fraudulent insurance benefits and to pay $500 in restitution to the accident victims.

With modern technology, many fraudulent car accident claims do arise from sophisticated organized crime rings, and even from individuals, that can be hard to detect. Direct victims of car insurance fraud pay with money and their or their family's lives. And even if one is not a direct auto insurance fraud victim, he or she is also liable to pay, even without his or her knowledge.  

DCCA estimates that insurance fraud costs each household in Hawai'i an additional $200 to $300 in increased premiums every year. For sure, there might be statistics too for the states in the continental US, with amounts approximating if not exceeding that of Hawaii.
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