Most everyone who pays for car insurance wonders why rates have gone up, especially over the last few years. One big reason, besides the number of uninsured drivers, is car insurance fraud. In fact, fraud cause rates to go up across the board and for all different types of insurance.
FRAUD: wrongful or criminal deception intended to result in financial or personal gain
For instance, not so long ago a Las Vegas, Nevada man was sentenced to federal prison for his role in schemes to defraud car insurance companies (here’s the link from the Las Vegas Review-Journal article 10/23/19 by David Ferrara: http://tiny.cc/7355ez ). In the article Mr. Ferrara ends with: “Prosecutors said in the release that car insurance fraud ‘affects every driver, as fraud causes insurance rates to increase. It also distracts police and medical personnel from responding to legitimate distress calls.’”
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There are other forms of fraud besides a staged accident scheme. Some are:
· Providing false information while getting a quote or on the application
· Registering a vehicle in a different state for cheaper rates
· Not disclosing all drivers of the vehicle or that are in the household
· Letting excluded or undisclosed drivers drive
· Getting a non-owner policy when you own a vehicle
· Distorting injuries for more money or filing multiple claims for the same injury
· Falsifying insurance documents (class D felony in some states)
· Driving for Transportation Network Companies without disclosing it
But what those committing the fraudulent activity don’t realize that they are in danger of having a claim go unpaid, policy cancellation or policy non-renewal. So while they may have saved a couple dollars upfront from their material misrepresentation, the car insurance carrier may not have to pay their claim if they did not represent themselves truthfully.
Some people think, “It’s just a white lie, how is it going to hurt?” Besides the above (possible claim denial, cancellation or non-renewal) fraud of any kind causes everyone’s rates to go up, in part due to cover increased payout costs. The more losses filed in your city or your state the higher rates go to compensate for the increased loss ratio (losses/loss expenses incurred divided by the total premium paid). Too much fraud also has the effect of some insurance companies leaving certain states to operate in a more managed business climates (in other words, where people are known to keep their auto insurance policies).
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Add to fraud, the number of uninsured drivers involved in accidents and it can make a more expensive mess for those who are telling the truth and abiding the car insurance requirements for their state. In states that have a particularly high uninsured driver segment, the auto insurance companies must also factor into the rate that they’ll probably have to pay a claim to fix their insured’s vehicle in an accident that wasn’t their fault. Normally the at fault driver’s insurance would cover the damage.
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