Smart Auto Insurance Blog

The high Michigan auto insurance quotes in Detroit and other Michigan cities are driving residents out as more and more people cannot afford the high costs.  It’s also causing thousands of residents to commit fraud or drop their insurance altogether.  This is according to the article “Car insurance rate setting hits Detroiters unfairly” by Jeff Gerritt on freep.com. 

Detroit is the nation’s poorest big city yet residents pay the highest average auto insurance rates in the country.  About half of its motorists go without insurance because it’s so expensive.  Part of the reason for this problem is what’s called territorial ratings, which allow auto insurance companies to base their prices in part where people reside.  Regardless of a person’s driving record, if they live in Detroit they will pay more for auto insurance.  Insurers state the reason for doing so is because these areas have been deemed higher risk. 

Since many are unable to afford their auto insurance costs, schemes are on the rise.  Some drivers buy fake insurance certificates for as little as $50.  Some use false suburban addresses when purchasing their policy to obtain a lower quote.

According to the article “Insurance Fraud Costs All of Us Money” by Jeanette Krebs on Pennlive.com, 7 out of 10 Pennsylvania drivers say they would not attempt insurance fraud.  That leaves about 2.5 million people who may consider fraud.  The same group of polled people believe that those who commit auto insurance fraud are rarely caught. 

Getting Pennsylvania auto insurance quotes already includes many factors most of which are based on individual information.  But the economy, business stability and fraud losses are all considered when auto insurance rates are determined.  This is why insurance fraud ends up costing all drivers on some level.  The worst part is that it is extremely difficult to catch these perpetrators.  According to the Franklin and Marshall University Poll about a quarter of respondents stated they would not report someone they knew involved in an insurance scam. 

In 1994 the fraud prevention authority was created as a funding mechanism, making funds available to law enforcement and prosecutors to manage insurance fraud.  The budget is approximately $11.6 billion which comes from insurance companies within the state.  Part of the money is also used to educate Pennsylvanians about fraud, such as TV ads letting people know they can go to jail for engaging in insurance fraud.

According to the article “Auto Insurance fraud cases surge, commissioner says” on myvalleynews.com, cases of suspected California auto insurance fraud has increased significantly over the past year.  State Insurance Commissioner Steve Poizner discussed the surge during an appearance in San Diego on Tuesday. 

It is suspected that the economic downturn is causing the increase in fraudulent behavior, but Poizner reminds Californians that breaking the law will only compound financial problems.  The state Department of Insurance estimates that fraud claims are up by 25% from 2007 to 2008.  The agency also received 200 more notices about possible auto theft fraud in 2008. 

Poizner advised that state insurance fraud investigators are hard at work to crack down on anyone attempting auto insurance fraud.  Not only does this behavior mean problems for the perpetrator but it also ultimately raises everyone’s auto insurance rates.

According to the article “Massachusetts Police Arrest 13 in Auto Insurance Fraud Case” from Claimsjournal.com, 13 people from Lawrence and Methuen have been charged with auto insurance fraud.  This is in connection to what police believe to be a staged accident where over $76,000 was paid out.

Lawrence Chief John Romero told The Eagle-Tribune that it is the largest group of people charged in connection with one incident since they started focusing on auto insurance fraud 6 years ago.  This crackdown was prompted by the death of a great-grandmother in a staged crash in 2003.

Ten of the thirteen charged say they were in a van that was hit on a ramp  in North Andover in May ‘03. The runner who allegedly set up the incident and the driver of another vehicle that hit the auto were charged as well.  It’s this kind of illegal behavior that ends up affecting everyone’s auto insurance rates.

The first major impact on auto insurance brought on by the economic downturn that received a great deal of media attention was that many people were going without auto insurance because they couldn’t afford it despite the fact that it is required by law.  In less severe cases they were simply reducing their levels of auto insurance coverage.

Another impact to auto insurance has been cases of auto insurance fraud.

• In Hawaii, auto insurance fraud convictions are up 61% from 2007 to 2008.
• Cases of abandoning vehicles and then reporting them stolen are up 33% over same time frame
• Pennsylvania auto insurance fraud cases are up 30%

Industry experts say this phenomena is not unusual, auto insurance fraud increases are typically experienced during an economic downturn such as the one we are experiencing today.  Unfortunately, other drivers pick up the tab on the $6 billion in fraud cases in the form of excess auto insurance payments.

Auto insurance companies warn that a new bill in the Colorado state legislature could increase rates for motorists, claims Bob Mook of the Denver Business Journal. In 2003, the state switched to a tort system (where insurers pay a percentage of costs based on whose fault the accident was, going to court to settle disputes), but the Colorado No-Fault Motor Vehicle Insurance Act would reverse that change.

Governor Bill Ritter says that the tort system saves drivers about $322 per year on average, a 35% decrease from auto insurance rates under the no-fault system. A representative of the Rocky Mountain Insurance Information Association claims that Colorado auto insurance premiums have dropped from being the ninth-highest in the nation to 23rd-highest since the reform. According to Bob, insurance companies believe that no-fault insurance, where each insurer pays all expenses for their driver without assigning blame, is easily defrauded.

The Insurance Journal recently published an article highlighting trouble in paradise: Hawaii auto insurance fraud is growing rapidly! According to the Department of Commerce and Consumer Affairs (DCCA), convictions by its Insurance Fraud Investigation Unit increased by a whopping 61% in 2008, following a similar increase in 2007.

Fraud results in higher auto insurance rates for all. Estimates from the DCCA claim that motor vehicle insurance fraud results in up to $300 worth of increased premiums per person per year.

(Photo credit: Scott Hudson under CC 2.0)