How Does Automobile Insurance Fraud Affect You and Me?

Automobile insurance fraud is more than just a staged accident or rolling one’s vehicle into the lake and then reporting it stolen. Auto insurance fraud is any claim that is exaggerated or ‘padded’ for the purpose of collecting additional money that the ‘victim’ is not truly entitled to. This might take the form of an estimate for inflated repair costs, an illegitimate or false injury claim, a medical bill for treatment not actually received, or a claim for lost wages when the injured person was truly able to work (or actually was).

Whether a fraudulent claim is made specifically against your automobile policy or against the company you are insured by, or against any other one, the financial affect against the industry ripples until all are affected. The more money an insurance company pays for claims, the more it needs to increase premiums so that it can make money and stay in business. Thus, every false or padded claim paid increases the insurance company’s costs, and those costs are passed on to the consumer.

Here are just some of the ways automobile insurance fraud affects everyone, and not just people who actually pay for automobile insurance:

First: Everyone’s automobile insurance premium is affected. The amount of money that you pay for your auto insurance policy is affected by many different factors such as your age, the vehicle you are insuring, your driving record and claims history, as well as the area that you live in. If you live in an area with a high level of fraudulent claims, your rates will increase.

Second: Your insurance company’s other resources are tied up as well. Suspicious claims take longer to investigate and are handled by the company’s more experienced and capable (and higher paid) insurance adjusters. This slows down insurance claims handling times for everyone. The alternative is that more insurance adjusters need to be hired, affecting the insurance company’s profits again and rippling back to you.

Third: fraudulent insurance claims tie up more than just the resources of the insurance company handling the claim. The police officer that had to respond and write a report is paid with your tax dollars. Once the insurance company believes that it is handling a fraudulent claim, the police (and sometimes even the FBI) get involved again (that is more of your tax dollars). The judge that hears the evidence when the case goes to court, either because the insurance company refused to pay it or because the insurance company is pursuing prosecution for insurance fraud is also paid with your tax dollars (as well as the public defender and the other courthouse employees).

Report fraudulent claims to your local law enforcement; you can do so anonymously if necessary. Or just call the National Insurance Crime Bureau (NICB) hotline at 1-800-835-6422 and give an anonymous tip. Remember, it is your dollar you are saving too.

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