New York: How To Cut Down Insurance Fraud


Over the past few years, auto insurance fraud is steadily climbing in New York and this prompted the lawmakers to pass laws that would impose severe penalties to the offenders. In an attempt to combat the fraud, a US Senator Charles Schumer passed the Cheaper Car Insurance Act of 2010.

Understanding the coverage

Once the law is passed, the judge has the power to set fine of up to $100,000 if the claim is proven fraudulent. For fraud involving over the $100,000 cap, the fine shall be equal to the actual cost of the fraud.

Additionally, the act entails jail time for the criminals. In New York alone, Schumer said that auto insurance fraud is likened to drug ring operations. The goal of the law is to catch the leaders of the syndicate and to punish them harshly – which literally translate up to 15 years of prison time.

The law will also allow the insurance companies to inspect the vehicle prior to insuring them to determine if fraud is committed or not. This will deter the criminals to buy already damaged car and to claim afterwards that the said vehicles were damaged in a car mishap.

What is the goal?

Car insurance fraud is not an isolated case, and every single driver pays 13 to 18% more on their car insurance as compared back in 2002. This is why the State of New York is working hard in reducing fraud cases in the bustling city. According to the reports, in 2002 alone, as much as 9% of all claims made were found to have traces of fraud. In 2007, it rose to 11% and continues to rise even to this date. Still unreported, but the recent economic depression is feared to have served as a catalyst for many individuals to commit insurance fraud.

As high as 33% of fraud growth rate has been identified since 2006. As a result, an insurance premium rose up to 6.3% in New York City. The Upstate New York has suffered the most car insurance fraud acts that any other parts of the state.

Lawmakers saw that by developing severe punishments for fraud criminals would ultimately reduce any acts of trying to falsify car accident records. For instance, criminals might succeed wedging few thousand dollars from insurance companies but will be deterred because of the $100,000 fine and jail time, which is not all worth it.

As mentioned earlier, car fraud affects everyone. In the United States, unprecedented growths of insurance rates were felt over the last ten years. This is because the insurance companies must recover the payments made on these false claims and therefore, the need to raise the rates to maintain their operations is inevitable. This is sad truth and the offenders may not realize that what they are doing affects everyone.

When auto insurance rates are raised up, it means that more drivers will not be able to buy policies and are forced to drive their vehicles without coverage. During an accident, they are forced to use their own money or file a bankruptcy if the expenses are too high to cover.

Reducing car insurance fraud in New York, or elsewhere, would mean lower insurance premiums for everyone. The more affordable the insurance becomes the greater of number of people who can enjoy the protection and everyone will be happy.