Lawmakers Take Action Against Auto, Home Insurance Fraud

04/26/2010

Preventing fraud may lead to lower insurance premiums for those who purchase coverage legally.

Passing the legislation that makes this possible, however, can be both time-consuming and expensive. A recent report by the Insurance Journal showed that many lawmakers are stepping up their efforts to deter fraud, which often targets the auto and homeowners insurance industries.

Lawmakers in Pennsylvania, for example, have introduced legislation that would punish claims adjusters who operate without a license. These individuals are likely to overestimate damages incurred on a property in order to reap their own benefits. Fraudsters in New Jersey sometimes purchase auto insurance in neighboring states where it is less expensive. A bill proposed in the state assembly would make this a crime.

"The renewed focus on fraud legislation is encouraging, but most legislation faces myriad tripwires on the road to becoming law, if they even get that far," said Goldblatt, the director of government affairs for the Coalition Against Insurance Fraud. "The economy's diverting impact should never be underestimated."

Fraudulent claims account for about $30 billion in losses each year, according to the Insurance Information Institute, motivating most states and the District of Columbia to establish fraud bureaus.

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