Depending on the source to which you turn, people are either defrauding insurers right and left as a consequence of the recession or things are rocking along about like normal. How much fraud goes on in the industry each year? Oh, anywhere from $80 billion to $200 billion. Yes, that’s right, the best estimate has a $120 billion margin of error. What’s up with that? Simple. Unlike car accident statistics, there is no national system in place for investigating insurance fraud so there simply are no good numbers.
Right now private companies, state insurance departments, and the federal government all conduct separate (and occasionally joint) investigations of insurance fraud and maintain separate records on different systems. About the safest thing we can say is that some types of fraud are up as a result of tough economic times, notably smashed car windows and staged auto accidents.
According to data compiled by the National Insurance Crime Bureau, claims for broken windows with questionable provenance are up about 14% for the first six months of this year. Why does this kind of thing go on? Simple. There is a common perception among consumers that they are forced to pay for auto insurance because it’s required by law. They shell out hundreds of dollars for years on end and never see a return on those dollars. A vast majority of people who engage in relatively minor instances of auto fraud express some variant on the idea that they were getting their own money back.
That’s a difficult point to argue. Insurance is one of those things you hate until you need it. Few people don’t resent paying for coverage and most of us, if we’re lucky, never actually file a claim. The flawed thinking in the minds of the people perpetrating the fraud, however, is that their actions are actually the major cause of high auto insurance rates. Insurers try to recoup their losses to fraud by raising premiums across the boards for all consumers, not just the ones who have actually tried to pull a fast one.
So, if you have a valid auto claim in the midst of the recession, be prepared for an extra stringent examination of the incident, especially a smashed window. While insurance fraud statistics as a whole are difficult to determine, fraud in these two areas is clearly on the upswing and clearly linked to economic frustration.