Fraud, Theft Making Car Insurance Prices

New York, Florida, California, Arizona, and all over the US today, you can see headlines about car theft and insurance fraud. It's no coincidence-it's the same every day. Insurance fraud has become so common with this poor economy with such high unemployment rates, the costs have actually just been passed on to policyholders in the form of premium increases.

Economic Downturns Drives Prices Up

Month to month, year to year, the price of insuring your automobile has been increasing since 2007. December 2010 saw the first decrease in month to month insurance rates, but it was less than a 1% difference, and was dwarfed by the big increase from November. The most optimistic estimates of economic growth show very little growth indeed, which aligns with the news from industry experts that insurance prices will probably increase another 20% in 2011 for most drivers.

Experts have proposed three reasons for the unnatural rise in insurance rates:

1. Increased stress causing poorer driving
2. More uninsured and underinsured drivers push costs unfairly onto insured motorists
3. Increased fraud and insurance scams forcing consumers to compensate for losses with premium hikes

Sociological evidence does suggest that people in a recession are more stressed, distracted, and reckless on the roads.

The logic behind the second idea is that insurance companies often lose money when an uninsured or underinsured motorist is involved in a collision with one of their policyholders. Rather than simply absorbing the costs, many insurance companies tend to increase premiums nationwide, spreading out the financial burden across their policyholders. In the short-term, this increase seems tiny, but month after month they begin to compound.
The third proposal might actually have the biggest impact.

Fraud Skyrockets during Downturn

Cases of fraud prosecutions have exploded over the last two years. There are new cases being reported in the news daily, but that does not mean that many others are not getting away with defrauding the insurance companies.

The costs of fraud are also spread out to policyholders in the form of premium increases.
However, arrests do seem to be coming at a higher rate than before. Law enforcement has been enacting new measures to catch scammers that include paying cash rewards to citizens who spill the beans on insurance criminals.

In Florida, at least, the Anti-Fraud Reward Program appears to be working wonders. If a citizen provides the police with information that helps catch the criminal, that citizen could receive a reward of up to $25-thousand.

Organized Crime Operations

The type of fraud that's driving prices up is not one person reporting that their windshield was broken during the night when truly they hit it with a baseball. The frauds making an impact are large, organized crime operations.

Criminal may pay citizens to buy a car, then they steal it, ship it overseas for re-sale, and collect the car insurance money for theft.
They could also hide the vehicle in a garage until the claim comes in, then sell the vehicle on the black market.

Beating the Price Hikes

Getting online car insurance quotes is the quickest, most effective way to find lower premiums. Search today to get high quality discount car insurance.