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Insurance Fraud

Insurance fraud

INSURANCE-Swoop and squat. Backing. Phantom vehicle. Paper collision. These are all terms that the average consumer may not be familiar with, but all are terms for insurance fraud, and they ultimately have an impact on your insurance premium.

According to the National Insurance Crime Bureau, insurance fraud is the second most costly white-collar crime in America, behind only tax evasion-and it's the honest consumer who pays for it. Because insurance rates are based on the insurance company's overall cost of doing business, it is estimated that the average American household would pay $200 to $300 less in premiums each year if fraudulent claims did not add to company costs.

All too often, insurance fraud can result in far more damage than just increased costs. In schemes such as staged auto accidents, innocent people can be hurt or even killed. In one ploy, a driver brakes suddenly in front of an unsuspecting motorist, causing a rear-end crash. In another, the driver "politely" waves a car into a merge, then intentionally hits the car and denies waving.

Fraud may be committed at different points in the insurance transaction by different parties: applicants for insurance, policyholders, third-party claimants or professionals who provide services to claimants. Common frauds include inflating actual claims, misrepresenting facts on an insurance application, submitting claims for injuries or damage that never occurred, and staging accidents, theft or damage.

How can you help?

Public awareness will help generate assistance on the part of the law-abiding public, who are the victims of fraud when they have to pay higher rates. Jim Rookard, director of insurance services for AAA Colorado, states, "If you believe you have knowledge of insurance fraud, you should contact local law enforcement. Insurance fraud is a crime and should be treated as a crime. Make sure the insurance adjustor handling your claim is aware of anything suspicious regarding your loss."