Increase in the number of suspicious auto insurance claims can lead to high premiums


shutterstock_10064710The cost of auto insurance premiums could go up drastically due to the suspicious claims that are increasingly seen by auto insurance companies. This is a clear sign of fraud which could spike up the premiums. Most people from the industry blame the financial crisis for this.

Bill LeFew, American Family Insurance agent, states that people feel tied up due to the economy. Since these people have lesser options, they have turned to auto insurance fraud.

He also states that insurance fraud had become more prevalent ever since the recession. LeFew has been an insurance agent for the last 34 years. He also serves as the treasurer at McHenry County.

Nationwide the suspicious claims had gone up by 24% in the last couple of years and had risen from 74,146 during 2008 to 91,797 in 2010 according to the latest figures that are available from National Insurance Crime Bureau. The suspicious claims had gone up by nearly 9% since 2009.

The inflated towing and storage bills as well as auto glass fraud seemed to show the largest gains as per the NICB report. However, the other claims supposedly due to hail damage also seem quite suspicious.

Beth O’Connor, special investigative unit team manager, State Farm, stated that in most cases even the policy holder was not aware of the fraud.

O’Connor got some reports recently that there was probably an auto glass scam that was operating at St. Charles that was nearby. These were vendors who set up shop close to gas stations and approached motorists offering to fix their damaged windshields. There were instances where the windshields were not damaged but the vendor might just fill up a crack or fix a chip and send the bill to the owner’s insurance companies, stated O’Connor.

The suspicious claims on auto glass fraud had climbed to 450% between 2009 and 2010 as per the reports from NICB.

The industry has been facing problems with the inflated towing and storage bills from towing companies for quite some time now. However, the suspicious claims in this particular category had increased to 114% between 2009 and 2010 as per the NICB report.

During these scams, a tow truck driver will typically show up at the accident site even before being summoned by the police or the persons involved, stated O’Connor. The tow company may even claim to be working with the vehicle owner’s insurance company or will state that the insurance company would cover the tow.