Every year small insurance fraud and theft cost the insurance industry and consumers millions.
Fraud and theft also drain the resources of state regulators and law enforcement officers.
Fraud schemes are often committed by those we least suspect.
For example, in one Louisiana case, referred for criminal prosecution, a man used his wife’s jewelry as the basis for a policy taken out on his girlfriend’s nonexistent jewelry. Then the girlfriend claimed the nonexistent jewelry had been stolen.
Another frequently used scam involves the vanishing automobile. A person insures his or her vehicle, arranges to have it disappear, reports it stolen and collects the insurance.
The insured person may arrange for the vehicle to be stripped in order to sell its parts. As a result, the vehicle is irretrievable, and the insurance company pays 100 percent of the value.
"When insurance fraud occurs, insurance consumers pay the price in the form of higher premiums," said Commissioner Jim Brown.
To make money, perpetrators sometimes put themselves in danger. A scheme that is often used is called the "swoop and squat auto accident." The vehicle in front of you stops suddenly, leaving you no choice but to hit it from behind.
The possibilities are endless, including the claim of a soft-tissue injury (such as whiplash to the neck.)
Another scheme involves an individual walking in front of a car in order to sustain injury and sue the insurance company.
Theft rings also contribute to the high cost of insurance.
Stolen vehicles are taken to chop shops, out-of-the-way places where parts of the vehicle are stripped, or "chopped," for resale. In some operations, vehicles are taken out of the country, making them virtually irretrievable.
A variation of this scheme is the mobile meltdown unit, a well-equipped van or other vehicle where jewelry, coins and other gold items are melted down just minutes away from the scene of the crime to avoid identification of the products.
Some operations alter the VIN numbers of stolen motor vehicles to conceal their identity. Others file identification numbers from firearms and other stolen goods.
A high percentage of these stolen goods are insured. When they are irretrievably altered, the insurance companies and ultimately the insurance consumer bear the loss.
If the goods are not insured, the owner pays personally for the stolen items.
In either case, it is the responsibility of insurance regulators, insurance companies and law enforcement officers to work together to stamp out insurance fraud and related crimes.
Only about a third of the insurance industry takes fraud seriously, according to a recent study by Conning & Co.
Government, industry and insurance consumers must take it seriously and work together to fight fraud and theft, which lead to higher costs for consumers.