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Fraud Costs Auto Insurance Customers Millions

7/19/2010

Auto insurance companies lose millions of dollars each year to fraud, and those costs are generally passed on to their customers.

All types of insurance fraud saw an upswing nationwide during the recession, as financially struggling people tried to unload vehicles they could no longer afford. Some common methods of doing so include reporting the vehicle stolen and then abandoning or burning it in a remote location.

Organized criminal enterprises in some states have even staged accidents to orchestrate millions of dollars in fraudulent insurance payments. The world of home insurance has seen its own share of fraud cases, with one particular scheme revolving around enhancing what would have otherwise been negligible property damage after a weather event.

Another more basic but common form of insurance fraud is lying about who was driving at the time of an accident. In fact, California Insurance Commissioner Steve Poizner recently highlighted this issue by announcing the arrest of three people who allegedly engaged in this type of fraud.

"Lying to your insurance company about the facts surrounding an auto accident is illegal, and a quick ticket to jail," said Poizner.

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