By Andrew Lees, Boston MA.
Insurance fraud perpetuated across the country has caused a significant rise in auto insurance premiums. Fraud is often blamed on consumers who fake accidents, and embellish claims to collect more money, but agents who are tempted by increased competition and a floundering economy also perpetuate fraud.
When insurance companies or their agents participate in fraudulent behavior, the consumer is hurt badly. Federal regulation of insurance companies is non-existent and Washington has left insurance regulation up to each state. There is heavy regulation in every state, and the insurance department of each state determines which insurance companies are allowed to do business in that state, and what rules they must abide by.
An official person that has a title of commissioner, or regulator heads state insurance departments. That person is in charge of the department and all insurance related laws and regulations. In some cases the governor appoints this person and in others they are elected to the position.
People that have insurance related complaints can file the matter with their state insurance department and in most cases, action will be taken by the department to investigate the matter and if necessary, take corrective action which could simply mean requiring an insurer to change their position on the matter at hand, or for serious violations it could mean fines and suspensions.
In October of 2010, Colorado insurance regulators released a report on how they dealt with complaints by insurance consumers over the 2009-2010 fiscal year. The report indicated that the Department of Insurance dealt with almost 5,000 complaints and that the investigation of those complaints lead to a recovery of $12 million paid to insurance customers. Of that figure $2.8 million came about due to complaints regarding automobile insurance companies.
While these complaints have had a serious dollar amount associated with them, very few actually constitute insurance fraud. In most cases the complaints revolve around the timeliness of claim payments and billing or non-renewal issues. According to the Colorado Department of Insurance, only 2 out of 5 complaints were due to intentional misconduct on the part of the insurance company.
Insurance agents continue to be involved in fraud related cases across the country. Recently Paul Franck Baptiste, an agent in Philadelphia pled guilty to insurance fraud when it was discovered that he had written several policies for people that lived in NY, but who falsely claimed they were residents of Pennsylvania so they could save hundreds of dollars on their auto insurance. Rates in Pennsylvania were much lower than comparable rates where the customers lived. Those customers were also charged for their role in the fraudulent activity.
Brooklyn, NY insurance broker Christian Inzerillo recently pled guilty to mail fraud charges in a case where he insured a number of New York City based taxi and livery businesses and claimed those businesses actually operated out of Hamburg, NY, a small town on the other side of the state, just south of Buffalo, NY. Rates for those businesses are much higher in metropolitan NY than in a small town, and Inzerillo supplied false information to insurance companies to get lower rates for his customers.
Independent insurance adjusters are often hired by insurance companies to handle their claims. In Gladwyne, Pennsylvania 74-year-old Andrew Yates was recently arrested on allegations of insurance fraud surrounding a massive fraud ring involving body shops and customers that systematically claimed damages and thefts that never occurred. Payments of $300,000 were collected under false pretenses and 13 people have been arrested.
Although the insurance industry is under tight regulation, fraud perpetuated by those individuals and companies within the industry itself still account for millions in fraud every year.
