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Car Insurance Fraud Leads to Higher Rates

Fraud is everywhere. From the person trying to sell you a genuine Rolex for just $10 to the spyware remover you install that ends up giving your computer a virus, you always have to be on the lookout for fraud. That is what car insurance companies are doing as insurance fraud is on the rise as more policyholders come upon hard economic times. Studies show that as the economy continues to go down, car insurance fraud continues to go up.

Unfortunately, you could end up paying for your insurance company's fraud experience. As more companies are dealing with fraud and the financial burden it causes, they have to pass along the cost to the consumers - that is you. Car insurance frauds are causing an increase in car insurance premiums.Take California for example. Car insurance frauds have increased in the state each year. The economy has caused more people to lose jobs and as a result, some are resorting to crime.

The California State Insurance Commissioner has reported that there has been a 25 percent increase in insurance fraud in 2008. That 25 percent increase has caused a nine percent increase in car insurance rates. Now California residents pay $1,649 for auto insurance premiums, which barely below the national average of $1,780.The increase from 2007 to 2008 auto insurance premium rates was at one percent. So to see a jump to nine percent shows just how costly the fraud of others can be to you.

Types of Car Insurance Frauds

There are several different types of car insurance fraud. Each and every one hurts you the consumer. This is how it works: a driver claims that something has happened to his or her vehicle to receive a pay out from an insurance company. They cash the check and you pay the insurance company. It is not fair, but it happens everyday.

Owner give-ups are just one type of car insurance fraud. This is when the owner of the vehicle tells the insurance company that his or her car has been stolen. They even go as far as filling out a police report. After the insurance company pays out the car is typically found burned in a secluded lot, submerged under water or even buried under the ground. When the alleged crime is reported to local law enforcement, it also uses your tax dollars, so you are being hit twice.

Another type of car insurance fraud is 30-day specials. When a car is in need of extensive repairs, they can hide the car for 30 days and report it stolen. During this time frame the insurance company settles the claim and sends a pay out to the policyholder. Once the check is cashed, the car is found abandoned.

Then there is export fraud. Once a person decides to purchase a vehicle, they go to a bank to secure a loan. After the loan is secured, an insurance policy is easy to obtain. The vehicle is reported stolen to a law enforcement agent, but then the owner ships the vehicle overseas. This allows the owner to collect on the insurance policy and make profits though a black market vehicle deal.

Have you ever heard of phantom vehicles? The vehicle does not exist, but people can still receive insurance payouts on them. How? A person can create a false title and/or registration to secure the car insurance policy. After a short time, the car is reported stolen. Most of the time luxury or classic cars are used in this type of scheme, so the payouts will be larger.

Filing a claim to pay for old damage to your vehicle is another way to commit insurance fraud. Investigators with insurance companies check to see when the damage actually occurred. Another way to use damages to receive more money is by asking your repair shop to add on to your bill. Some people ask their mechanic to add their deductible to the final bill, meaning they will not have to pay out anything. A deductible is how much a person has to pay before the insurance policy takes effect. If this is added to the bill, then that means you will not have to pay.

Insurance Companies Can Sue Over Car Fraud

Insurance companies are not taking fraud lying down. They are fighting back by using the legal system. If you try to fraud the insurance company, you can end up being sued or worse. Companies are using private investigators to delve deeper every time someone files a claim. Yes, this helps them prevent fraud, but it also makes you go through extra steps.

Insurance companies are working with law enforcement to try to avoid paying out large sums of money to those who are not making true claims. If you go to the doctor's office too much after being injured, this could raise suspicion. Companies are also checking to see if you left your keys in the vehicle and if you lied and said other people were in the car at the time of the accident just to get a higher payout.

The state of Massachusetts is really hitting insurance fraudsters hard and has discovered over $30 million in fake claims. They have also charged over 200 people since 2003. More and more states are taking similar action. If you are found guilty of committing insurance fraud, not only will you be found financially responsible, but you can also end up in prison.

Ways to Save on Car Insurance

You do not have to be forced to pay higher insurance premium rates because of the dishonesty of others. There are always ways to save to help curb the increase in costs. Your insurance premium rates are based on a variety of different factors and if you can appear to be a low risk to the auto insurance company, then you may be able to find a better rate despite the increase in crime.

A driver's age, gender, type of vehicle, location, driving record, marital status and even credit history will all play a role in how much he or she is charged for auto insurance. The more stable you appear to an insurance company the lower your premium rate will be. This is true for not only car insurance, but also other types as well including health and homeowner's coverage. For example, if you have a high credit score you will be viewed as a more responsible insurance policyholder.

Doing some research into the insurance company, can also help you save in the long run. A quick news search may reveal if your current provider has been victimized by car insurance fraud. As car insurance fraud increases, more and more companies are speaking out.

See what your auto insurance provider is saying about car insurance fraud. If they take a strong stance against insurance fraud, like hiring investigators and thoroughly checking claims, then that is to your benefit because they are not being taken advantage of. It will also help you determine if the company is worth doing business with. A company that has been hurt by insurance fraud may make it harder on their more honest of customers. You want a company that will work with you and not doubt you.


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