Auto Insurance Fraud Increase Linked to Recession

In these trying economic times, the line between right and wrong is becoming blurred. The Coalition Against Insurance Fraud (CAIF) reports that the number of people who believe committing auto insurance fraud is an acceptable practice is on the rise. from 2007 to 2008. The New York fraud bureau reported a 38% increase in auto give-ups in 2008. ‘Auto give-ups' is a term that was coined to describe the practice of abandoning a car and reporting it stolen.

“Insurance fraud normally increases during a troubled economy. The credit crunch, subprime meltdown, higher gas prices and general economic distress have led more drivers to seek a bailout through insurance money,” said Dennis Jay, executive director of the CAIF.

In Idaho, insurance fraud and arson are becoming more prevalent with the current decline in the economy. Idaho Department of Insurance Director Bill Deal said, “These crimes will not be tolerated and can result in significant jail time for the individuals involved.”

Public outrage over auto insurance fraud has become increasingly lax over the past few years. People are willing to look the other way when the perpetrator is a friend or relative.

May people rationalize their decisions to commit fraud based on the circumstances of their plan; taking into consideration whether or not the fraud is commonly committed or if anyone will be hurt.

Insurance fraud hurts insurance companies and everyone buying insurance. Elizabeth Sprinkel, Senior Vice President of The Insurance Research Council said, “Claim abuse continues to be a significant problem. The excess payments attributable to fraud and buildup help drive up the costs of insurance for everyone.”

The CAIF estimates that insurance fraud costs at least $80 billion each year, or almost $950 per family. In the end, consumers pay the price for fraud.