More fraud means higher rates

More fraud means higher rates

More fraud means higher rates

It's remarkable how trusting some people can be. You ask them for help, you make friends with them even for a moment and, suddenly, they are prepared to do things for you. In the best cases, they are prepared to give you money. Life can be sweet for the people with honest faces and a good scam. Except, after a while, you run out of easy marks, so have to look around for a new set of victims. One of the next steps up the ladder is the photocopying paper invoice. It's surprising how many small firms will just pay an invoice that comes in for routine consumables used around the office. No one thinks to count how many packs of paper they have or how many deliveries they took. If the invoice looks right, they pay. But then you could move higher up the fraud tree.

The current low fruit waiting to be plucked are in the insurance industry. Why is this? Well, it comes down to a number of factors. The first is the usual inefficiency of large organizations. With so many people working the administrative side of the business, many do their jobs on auto-pilot. If they can tick all the boxes on their checklists, they pay out on a claim. Second is the increasing boldness of the fraudsters. They are now into staging traffic accidents. Those with small numbers of people to call on find clinics with flexible morals and pay kickbacks for unnecessary treatment and favorable medical reports to support their claims. The professionals set up their own clinics. Some are just shells to front the fake medical reports. Others are genuine to slip through the fake claims.

New York recently announced that a special fraud task force had arrested one-hundred-fifty-nine people with millions of dollars in claims. But this is the tip of the iceberg. The same investigators report 12,800 suspected cases of fraud in 2010. The task force does not have the resources to investigate more than a handful of these claims. They will just be paid out. Why should we worry?

The problem is simple. If insurers pay out on false claims, the money has to come from somewhere. The actuaries only estimated the amount of claims arising from real accidents. The shortfall comes from increasing auto insurance quotes. Obviously, the insurers cannot expect their investors to take a hit on their expected dividends. So all us ordinary policyholders have to pick up the bill. Worse, the more people get away with fraud, the more they are encouraged to repeat the offense. That's why there's been a steady increase in the number of suspected fraud cases across the nation. If it keeps on going unchecked, we will all end up paying ever higher premiums when those auto insurance quotes come in. This makes it a political issue. Why should we voters be the ones to pick up the tab for all this fraud? The insurance industry could employ more people to investigate suspected cases. The states could devote more resources to police forces to collect sufficient evidence to bring these people to court. It's up to you to let your local politicians how you intend to vote at the next elections.

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