Tag Archives: fraud

Car Insurance Fraud

The festive season requires extra monies for Christmas gifts and elaborate celebrations. Price hikes intensify in January. School fees, household and vehicle insurance increases. Therefore this makes car insurance fraud attractive to certain types of individuals.

Car insurance fraud is illegal in all 50 states in America. Insurance companies do all they can to investigate and expose car insurance fraud. The following are some ways these scams are committed: –

1. “Owner-give-up”, i. e. vehicle dumping where an owner disposes of the vehicle by leaving it somewhere, dumping it into a lake or river, burying it or even selling it. A claim of theft is then submitted to the insurance company, thus an owner committing car insurance fraud.

When the car is sold before a report of theft is made, the fraudster will claim that the vehicle was stolen and thus obtain funds from the insurance company. Extra monies too from the sale of the original vehicle.

2. Sometimes mechanics use shoddy parts to repair a vehicle. They also  present an over-exaggerated parts and/or labour claim to insurers. Some resort to fabricating the extent of the vehicle damage.

3. Another car repair scam involves the replacement of airbags after an accident. The repairers stuff the compartments with objects with items such as beer cans or pack in peanuts to keep the sensors activated. California passed a protective law against such practices and as a result the guilty party could face a year in prison plus a $5000 fine.

4. Fake traffic deaths or collisions staged by fraud rings may result in false or exaggerated claims. The group may consist of claims adjusters and dishonest officers who create bogus police reports to process claim application.

5. A well-known tactic swindlers use is to drive to a bustling junction or roundabout and apply brakes sharply therefore causing a motorist to collide with the back of the fraudster’s vehicle. Accusations of fast driving or tail-gating is labelled as the reason for the collision.
Claimants may use a “recruited” doctor to diagnose whiplash or other soft-tissue injuries. These are difficult to dispute later.

Many people do not realise that loss indicator insurance agents have “red flags” they look for in possible scams:

– A claimant who is totally unflustered after submitting a large claim.
– Hand-written receipts for repairs on a covered item.
– An insured who increases auto insurance coverage shortly before submitting a claim.

Many insurers have Special Investigation Units. Employees who work in SIUs generally have backgrounds as detectives, police officers and medical personnel. Insurers are now using social media on suspicious claims. Perhaps the claimant who said his car suffered hail damage will be bragging about his deception on Facebook or Twitter.

Car insurance fraud is not just a problem for insurance companies. It is your problem too. According to FBI statistics, non-health insurance fraud costs $40 billion annually, which you cover by paying annual premiums $400 to $700 higher than they would be if there were no fraud at all.

In 1993 The Coalition Against Insurance Fraud was founded. This organisation collects information on insurance fraud. Through its unique work it empowers consumers to fight back. It helps fraud fighters to detect this crime. The Coalition deters more people from committing fraud. It has information, research and data services and insight to help the anti-fraud community.

AI

The insurance industry has data at its centre.  Data is gathered in large amounts on a daily basis. In addition, this process happens at a tremendous speed.  AI and machine learning are transforming the industry. Human-like machines are thus being built.

According to surveys, humans do not, however, mind interacting with a bot.  Consumers are satisfied to get computer-generated insurance advice.

Tata Consultancy Services has invested $124 million in AI. Other industries invested on average $70 million.

Many claims, customer queries and huge amounts of data resulting in the insurance industry being a natural use case for AI.

* Claims are handled rapidly;
* AI identifies patterns in data and can, therefore, find fraudulent claims;
* The collection of this data helps with risk evaluation;
* Powered chatbots replace human assistants. This results in fast and efficient customer service;
* Chatbots are able to obtain customers’ geographic and social data. This increases personalised interactions;
* Wearable sensors will lower premiums for less risky behaviour. This includes driving and exercising.

Claims can be forwarded through a mobile app, photos taken of the accident and the claim submitted instantly. Trained algorithms via pictures from past claims can estimate the cost of damage.

Siri, Alexa and Google have become part of our daily lives. Through voice recognition, tones and emotions can thus give clues regarding customer service and fraud detection.

In addition, by means of past pattern analysis and actions, AI can recommend suitable action to management on how to retain a customer. Furthermore, additional recommendations can be made in which additional insurance products to sell to the client.

A Gartner report furthermore predicts that by 2020, 85% of interactions with customers will occur without human involvement. In addition, the savings by using bots instead of humans would be passed onto the consumers by means of cheaper premiums.

Auto Insurance in Detroit

According to the US Census, Detroit, Michigan has a high rate of poverty with a population that is 83 per cent black and 39 per cent impoverished.

For auto insurance in Detroit,  one is subject to the most expensive zip code in the United States. This is followed by Philadelphia and Brooklyn. The Detroit zip code 48227 is a 130 percent increase over the Michigan average of $2,226.

A driver’s location is typically used to start the process of calculating when applying for auto insurance in Detroit. This is further followed by the number and severity of the applicant’s car insurance claims in that vicinity. The driver’s driving record, age and the type of vehicle to be insured are further aspects taken into account. Insurance fraud which is rampant in Detroit is an additional factor contributing to high auto insurance in Detroit.

According to CarInsurance.com approximately 21 per cent of Michigan motorists are uninsured. Detroit’s rate of vehicle theft in 2014 was 1,534 per 100,000 residents, which is seven times the national average. This information was obtained from the FBI and Detroit Police department.

Michigan is among 12 states with compulsory no-fault auto insurance to bypass lawsuits over accidents. It is the only state that requires unlimited medical coverage, which insurance companies have tried to cap for many years. In contrast, New York necessitates $50,000 medical coverage.

Robert Hunter, a director of insurance at the Washington-based Consumer Federation of America made a statement that if he was going to be hit by a car and seriously injured, he would prefer it if it happened in Michigan. However, those people without insurance are barred by Michigan law from suing.

Michigan’s no-fault insurance law became effective in 1973. It requires motorists to carry no-fault auto insurance which provides unlimited lifetime medical benefits for motorists suffering auto injuries and up to
$5,392 per month in wage loss benefits for up to three years, regardless of who’s at fault in an accident. This means your premium rates can go up after an accident, even if you were not at fault.

Critics of no-fault insurance argue it has led to higher insurance premiums because of generous accident benefits and say it encourages risky and fraudulent behaviour. On top of no-fault insurance, drivers in Michigan are required by law to have personal injury protection, property protection and residual liability coverage, all of which add to the costs of auto insurance.

Personal Injury Protection:

  • Benefits are paid to the accident victim by his/her own insurance company. These include the following: –
  • All reasonable and necessary medical expenses
  • Work loss benefits, up to a maximum of $5,189 per month for three years. This is subject to annual cost-of-living adjustment. Higher benefit limits may be purchased.
  • Up to $20 per day, for a maximum of three years for “replacement services”. This pays for services which the injured person can no longer perform.

  • Survivors’ loss benefits and replacement services benefits are paid to the insured’s dependents in case of death.
  • Funeral and burial expense benefits of a minimum of $1,750.

Personal Injury Protection coverage applies to accidents occurring throughout the United States and Canada. It covers you and your family while riding in any car and as pedestrians. Premium costs for this coverage can be reduced by choosing a deductible for medical benefits and a waiting period or deductible for work loss benefits.

Property Protection:

This provides coverage for damage caused by your car to property of others (except moving vehicles), regardless of fault.

  • Coverage is provided up to a $1,000,000 maximum.
  • Vehicles are excluded from coverage, unless properly parked.

  • Property protection does not apply to accidents occurring outside the state of Michigan.

Residual Liability:

This provides protection if you are sued or are legally responsible:

  • In accidents involving death, serious impairment of body function, or permanent, serious disfigurement.
  • When actual economic losses sustained in an accident exceed the benefits available in Personal Injury Protection coverage.
  • In accidents occurring outside of Michigan, for property damage and bodily injury.

The required limits of this coverage are $20,000 for one person’s injury. $40,000 for all persons injured in one accident and $10,000 for property damage. Higher limits may be purchased.

Detroit residents who are hurt in vehicle collisions and have no insurance, risk losing everything. They are forced to turn to Medicaid. The high cost of insurance also shrinks Detroit’s voter rolls because residents register their vehicles at suburban addresses to get lower rates and thus cannot register to vote in the city.

Other factors driving up Detroit’s auto insurance premiums:

Detroit has more accidents on its highways and roads than other Michigan towns and rural areas. Reported accidents account for 7% recorded in Michigan.

Fraud involving therapy and chiropractic schemes is excessive. Dubious medical claims in Detroit jumped 124% between 2009 and 2014. Claims in Detroit accounted for one third of all claims in Michigan in 2014.

The Detroit City Council unanimously approved a contract for an actuarial firm to begin looking into whether the city would be able to feasibly sponsor its own city-run auto insurance company to help drive prices down for residents.

Mayor Mike Duggan recently said that since he moved into the city with his family, his auto insurance premiums had gone up more than $3,000. It has been said that the high cost of auto insurance premiums is one of the key reasons residents have been leaving the city for years.

Whether is is truly possible is an unknown at the present time, particularly after the city just emerged from the nation’s largest municipal bankruptcy. It is certainly worth exploring. If the city can self-insure its residents, saving lots of money would certainly be a welcome change.