Insurance Fraud - Another Reason Your Premiums Increase

Insurance fraud increases your insurance premiums. Insurers must spend a significant portion of premium dollars to combat fraud. Frequently, even if the insurer suspects fraud, the insurer is limited in its ability to investigate and pursue the individuals involved.

A story from Lawrence, Massachusetts, earlier this month illustrates this problem. In 2002, it is alleged that an accident was staged involving a Volkswagen and Lincoln automobile. The drivers and claimed passengers made insurance claims. One insurer paid the claims - most to a now out-of-business chiropractor - and did no further investigation. The other insurer reconstructed the accident and denied all of the claims. Its reconstruction cast serious doubt on the claims of the alleged drivers and passengers. The investigators found that the Volkswagen struck a fixed object rather than being struck by the Lincoln as claimed. Now, five years after the accident and claims, those involved have been charged with insurance fraud and related crimes.

Insurers have found that actively pursuing insurance fraud cases and encouraging states to do the same results in significant premium savings for auto owners. Massachusetts has developed an Insurance Fraud Bureau that has pursued these investigations with great results. According to statistics from the 2006 annual report, auto insurance premiums were reduced by 11.7% in Massachusetts in 2007. On average, each insured driver in Massachusetts had their premiums reduced by $119 per year.