Posts Tagged ‘car insurance rates’

If you have ever wondered what effects the decisions made by insurance companies when you get a quick car insurance quote, there are several factors that are considered. One is the incidence of fraud. These estimates by the Insurance Research Council (IRC) show this has added billions of dollars to claims paid by insurance companies and is a factor in calculating car insurance rates.

Fraud Costs Insurance Companies and their Clients

What is considered fraud by these companies? The claims have shown that the facts were manipulated in many cases when it came to bodily injury. These types of claims increased to approximately 11% of claims for Personal Injury Protection (PIP) involving cases that have been closed. When comparing the claims paid by five of the main insurance companies, they have paid between 13% and 18% in excess for fraudulent claims.

This naturally will have an effect on the amount that insurance companies have to charge customers for insurance premiums. The incidence of fraud involved injuries claiming sprains and strain that kept the claimant from working. Their disability was often not treated in conventional settings. Most of the treatments were received form chiropractors and physical therapists as well as others.

Studies Indicate Fraud is on the Rise

The IRC conducts many investigations and studies into the trends of insurance fraud as well as many other factors when it comes to the quick car insurance quote you ultimately receive. One study, Fraud and Buildup in Auto Injury Insurance Claims, involved claims made to 22 insurers. The facts and figures are most likely not the absolute total since the only claims studied were closed claims.

The research in this study collected the data of 42,000 claims for auto injuries that had already been paid and closed. The study involving 22 insurers in the U.S. Research was based on the claimed losses, the medical treatment received and the injuries sustained. In addition, payments made losses that were claimed and the way in which these claims were handled was studied. Was there a common link in the claims?

What they did find was that the highest incidence of fraud involved claiming injuries were worse than they actually were. The injury was sustained but it was not as bad as claimed. The term used for this type of claim is build-up. This resulted in payments for treatments and other procedures that were not necessary. Percentage-wise, about 22% of claims in 2007 appeared to be from those who were not injured as badly as they claimed.

With results such as this, it stands to reason a quick car insurance quote may end up being higher than if the incidence were much lower. The rates we pay for insurance are reflected by many aspects – fraud is one of the most prevalent. Because injuries involving sprains and twists are easier to inflate to a status that is more severe, the increase in build-up claims is the most common one found among abuse of the insurance system.

This is well worth considering the next time you opt for a quick car insurance quote. Often people are perplexed as to why rates increase when we are more focused on safety today. Fraud is just one of the reasons for this increase.