Car Insurance

The subject of insurance fraud has been attracting a good deal of press in recent years. The reasons for this are several: 1) Consumers have become more aware of the added cost fraud brings to their insurance premium payments and, having come to that realization, are no longer willing to have those costs passed on to them by insurance companies. 2) Insurers themselves have come to realize that just passing on those costs without trying to curtail them gives the industry a bad image; and 3) some state insurance departments have mandated that insurers operating within their borders make a concerted effort to reduce fraud.

All this attention has apparently had some positive results, according to the Oak Brook, Illinois-based Insurance Research Council. According to a recent survey conducted on behalf of the IRC by Roper Starch Worldwide, nine out ten people queried were aware that insurance claim fraud is a factor in the rising cost of auto insurance, and seven out of ten said it’s a major factor.

Also contributing to increasing auto insurance costs is the “exaggeration” of claims for legitimate losses, a practice known as buildup, according to the IRC study. In fact, because acceptance of insurance claim buildup appears to be so pervasive, many believe its effect on costs is much greater than the effect of false claims, notes the Research Council.

The IRC has been tracking responses to both fraudulent claims and padded claims since 1981 and it’s interesting to note that, while there was a steady climb in such behavior during the 1980s, the trend appears to be heading downward.

After hovering just under one-third of respondents for several years during the early ’80s, the percentage agreeing that it’s all right to pad a claim to “make up for the deductible” dropped to 22% in 1993.