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Government Intervention on Auto Insurance Fraud

government intervention on car insurance fraudGovernment intervention on auto insurance fraud is an unfortunate necessity these days because of the negative impact on the United States economy. This offensive crime costs consumers millions each year.

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The Coalition Against Insurance Fraud reports that an incredible $80 billion in phony claims funnel through the system every year and these numbers are on the low side. The truth is no one can be sure of the exact number since many people get away without consequences.

Helpful Tips and Suggestions

One of the ways the government intervenes with car insurance fraud is by preparing consumers. They provide helpful tips and suggestions on every Department of Insurance website. Residents of Louisiana can review information in detail to gain better knowledge of certain schemes to increase awareness.

For example, they can learn the distinction between soft and hard auto insurance fraud. Most may not understand that both affect their area, but those who participate in these tactics have a different approach.

government intervention on automobile insurance fraudThe hard fraud scenario usually includes staged accidents, multiple false claims, and arson. These intentional crimes generally involve the work of a criminal mastermind organizations, groups, or rings. You frequently hear about them in the news and on the Internet.

Soft fraud cases are less serious and individualized. Most people guilty of this crime tend to pad their accident report or claim with more damage to receive a higher settlement. In either circumstance, the results are the same; they break the law and cause harm to blameless victims.

The Department of Insurance also provides citizens with referrals to report instances of car insurance fraud. Sometimes they set up toll-free, anonymous hotlines to encourage involvement. Other times, they use an online form you can complete and submit. They rely on people like you to help expose criminal activity, which benefits the entire community.

Special Unit Dedicated to Car Insurance Fraud

The Federal Bureau of Investigation created the Financial Crimes Section or FCS to monitor and combat insurance fraud in the United States; it consists of four specific units, including the Economic Crimes Unit.

The Economic Crimes Unit has one primary goal, to decrease the amount consumers pay for car insurance as a direct reflection of fraud. They estimate that the average annual premium increase is approximately $300 per household.

government intervention on auto insurance fraudMost of their investigations surround the identification of major plots involving the top criminals, which drain the wallets of the American people. However, they sometimes work on individual car insurance fraud cases too.

An example would be during the aftermath of Hurricane Katrina, where tens of thousands of property casualty claims produced numerous red flags. This caused the members of the ECU to investigate.

According to the experts, the residents of Louisiana suffered overwhelming losses of $100 billion. This included 1.6 million processed auto insurance claims.

Sadly, many customers who never thought to file a fake claim took advantage of this natural disaster to increase the amount of damage to their vehicle so they would receive extra compensation.

The National Association of Insurance Commissioners states this part of the Gulf Coast accounted for at least $4 to $6 billion in fraudulent car insurance claims, during 2005.

Regrettably, the auto insurance industry is much too large and this is why many continue to target this area. They know the FBI cannot accomplish their goal alone.

This is why FBI also works directly with the National Insurance Crime Bureau or NICB to compile data. They have excellent record-keeping procedures. They combine the information they receive from thousands of insurance companies, law enforcement agents as well as the average consumer to fight against auto insurance fraud.

Changing Current Legislation

As recently as May 19, 2012, the state of Michigan legislators proposed a new bill specific to car insurance fraud. This bill numbered 5701 makes it mandatory for every automobile insurance carrier to provide a monetary contribution back to the state.

some government intervention on car insurance fraudIf approved it becomes law and will allow a new tax for car insurance companies that will help generate approximately $21 million. This money will go towards the efforts to decrease car insurance fraud within the state of Michigan.

Over 90% of the residents agree with the bill; they would pay an additional amount to support their state. In June 2012, the House made it official. It currently sits in the hands of the Senate Insurance Committee.

One of the main reasons the state officials introduced this bill in Michigan is because of the shocking statistics they reported. For instance, every six residents admit to having a friend, co-worker, or family member who participated in auto insurance fraud.

They also report that the state has a record of convictions for car insurance fraud that includes one in 10 claims. If the car insurance providers in Michigan receive 100 claims, 10 are false. This is a drastic and frightening fact.

Strict Penalties

Over the past two decades, the government has shown a major interest in this type of crime including measuring the consequences. In all states, car insurance fraud is not a misdemeanor, but a felony.

However, depending on the details, it may rate as a class of A, B, C or D. In the case of a Class D, the punishment could be a fine of $5000 and five years in prison; you might receive both.

A Class C felony could land you in prison for 10 years and have you paying a $10,000 fine.

While a Class B, felony carries a 20-year prison sentence and a $15,000 fine, a Class A felony is the most severe and carries the longest prison term of 25 years, along with a $25,000 fine. The factors that determine the severity of your penalty vary and include charges including false statements, false claims, kickbacks or bribes and racketeering.

some government intervention on automobile insurance fraudLess serious charges of making a false statement means, you willfully withheld or falsified facts on your car insurance application. Perhaps you failed to inform the company of a DUI or used a fake driver’s license to obtain coverage.

A false claim refers to the deliberate submission of inaccurate information on your damage claim. You could report your vehicle as stolen, but in reality, it is locked in a storage garage or facility. Maybe you shipped the car overseas.

Kickbacks and bribes generally refer to agents and brokers who already receive payment, but use their profession to charge potential customers for their services. You should never pay to meet with an auto insurance agent to discuss your options.

Finally, racketeering is the equivalent of someone with a history of submitting false claims through the mail or over the telephone. The monetary gain in these types of plots often results in millions of dollars. These are the types of scams the FBI shows the most interest in shutting down.

When they catch them, they usually charge them with a violation of the RICO or Racketeer Influenced and Corrupt Organization Act. After indictment and sentencing, they often receive a 25-year prison term.

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Additional Resources for Senior Citizens

Nothing is more despicable than taking advantage of an elderly senior citizen, but many times, they become victims more than any other age demographic. Seniors who live on a fixed income seem to be the biggest target for unscrupulous companies that only exist to defraud their customers.

some government intervention on auto insurance fraudTheir game begins when they promise deep discounts for seniors, usually over 65 because they do not drive as much and often select minimal coverage. These kinds of companies seldom have a license to write policies and do not register with the Department of Insurance. Unfortunately, this does not deter them from setting up practice right in your neighborhood.

Other, craftier criminals use the Internet to peddle their services. They create websites based on senior discounts and phony offers. These companies are even more difficult to track because they do not have an actual office within the community.

These perpetrators hire so-called agents whose sole purpose is to sell a non-existent policy to an unsuspecting older customer. They never intend on settling any claims and within a few short months, they close up shop and move onto their next victims.

The government has provided additional resources for the benefit of senior citizens, which includes consumer protection services and elder rights protection. In many cases of committing car insurance fraud against a senior, the offender receives a harsher punishment for violating their rights as well.

Consistent Communication

The auto insurance industry and the United States government work together and consistently communicate through seminars and workshops all throughout the year.

Many times, those in the insurance field have requirements to attend these types of events so they remain current and conscious of certain methods. For example, most of the larger auto insurance fraud organizations make subtle changes to avoid notice and stay under the radar.

government intervention on some auto insurance fraudBy exchanging ideas and staying in contact with each other, people in the car insurance trade can alert government representatives and law enforcement administrators quickly and efficiently. Together they can capture more lawbreakers and see to it that they receive a justified punishment that matches their actions.

Living in the United States has many positive aspects including freedom of speech and abundant opportunities. Unfortunately, liberty and independence also comes with certain obstacles and negative features. Auto insurance fraud is but one hurdle that this country must overcome.

However, with the increased attentiveness of our government and the assistance of American citizens, this is something that can become a problem of the past. Diligence and perseverance will prevail and soon these criminal activities will end permanently.

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