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While most drivers do everything they can to avoid an accident, there are some who head out on the road hoping to find trouble.

The New York State Senate recently passed a series of bills to combat auto insurance fraud, which costs New Yorkers more than $1 billion a year according to the press release. Recent discovery has unveiled massive crime rings of staged auto accidents including doctors, patients, lawyers all schemed together to use the insurance program as a revenue source. Three dozen scam artists are accused of stealing more than $279 million in accident benefits over five years.

Cost Of Auto Insurance FraudPeople that plan to commit auto fraud often take out auto insurance policies and pay for the initial premium with a bad check, an unauthorized bank account or stolen credit card and then commit fraud once the policy is in place. New laws will now allow an insurance company to retroactively cancel an insurance policy in the first sixty days if the initial premium payment is not paid. The new laws also increase the punishment for those who intend to commit fraud by increasing the crime to a class D felony, punishable by up to seven years in prison.

Senator Seward in New York said that women and elderly drivers are in particular danger because they are often targeted for these accidents because they are less likely to be confrontational after an accident, thereby making it easier for criminals to engage in this activity.

To the average auto insurance customer, auto insurance fraud committed by others adds $200-$300 a year to their individual insurance premium, according to estimates from the National Insurance Crime Bureau (NICB). Fraud increases insurance rates, and therefore, everybody pays the price.

Auto insurance fraud is generally classified as "hard" or "soft." Hard fraud, which involves staging or inventing an event that would be covered by insurance, includes intentional rear-end collisions, phony injury claims, inventing injuries to people who were not in the vehicle at the time of the accident, or claiming a one-car accident was a hit-and-run. These are some of the many scenarios attempted by the crime spree in New York. An increasingly common scam is occurring when a policy holder secretly abandons their car and then reports it stolen. This allows the owner to use the insurance money to pay off their car loan without damaging their credit rating.

Soft fraud, also known as "build up," is more opportunistic, involving policy holders who had a legitimate claim, but embellished the situation such as adding previous damage to a current claim, conspiring with a body shop to pad a repair estimate, or conspiring with doctors to obtain unnecessary medical treatments.

Insurance companies must investigate each claim individually to check for fraud, which costs more time and money for both the insurance company and for the customer. While a claim is under investigation, an insurance company can request medical or police records. Meanwhile, the policy holder, who could be facing expensive medical and vehicle repair bills, waiting to be reimbursed.
 
After tax evasion, insurance fraud is the second most costly white-collar crime in America. Nearly 25 % of bodily injury claims resulting from vehicle crashes are fraudulent, according to industry studies. Even estimated on insurance fraud are generally far below reality because of the number of fraudulent cases that go unnoticed.

While it may seem to be an invisible crime, a perfect scenario for crooks to gain money out of insurance companies, it clearly affects all of us whether we are another claimant trying to get money for our accident, a victim who finds themselves in the middle of a fraudulent accident or a policy holder with increased rates to pay for the crimes of others.


By Matt Reynolds - Google+
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