Dodging auto premiums should be crime

Lying about garaging vehicles burdens honest drivers Continue reading

Summer driving season is in full swing. It’s a reminder that dishonest drivers are illicitly registering their vehicles in states where premiums are lower. The Coalition is calling for states to go after these drivers.

Using out-of-state addresses to insure a car illegally reduces the driver’s auto premiums. It also burden honest insurance consumers who insure their vehicles with their real address. They may pay higher auto premiums thanks to drivers who cheat the system.

North Carolina was the first state to tackle this issue by requiring new insureds to show proof of residence before an insurer could write a policy. Out-of-staters were registering their vehicles in North Carolina for the lower auto premiums.

North Carolina recently went a step further and put more teeth in the existing law. Trucking firms are falsely registering their fleets in the state yet have no operations there. The new law requires businesses to prove they ply the roads in the Tar Heel state.

Falsely registering vehicles in New Jersey is a specific insurance crime.

The Coalition seeks a similar law in New York. Bills have stalled, though we and our partners there are planning to reboot in 2017.

A Maryland bill would’ve let insurers rescind policies of drivers who falsely registered their vehicles in the state. The state held a public meeting. An insurer told about a claimed loss in Maryland by an insured who lived in New York — where the insurer doesn’t write coverage. The insurer paid the claim to avoid a baseless yet potentially costly bad-faith suit.

The statehouse will revisit legislation in 2017.

The Coalition strongly supports targeting auto rate evasion. Tough state laws can remove a driver’s incentive to take the risk.  Consumers who lie about where they drive to lower their auto premiums add burdens to the many thousands of honest drivers. This undermines the integrity of the auto-insurance system.

Fraud fighters have taken the forefront on this issue. Stay alert to auto-premium evasion in your state. Tell the Coalition and your state insurance department. Falsely registering a vehicle should be a ticket to jail, not an easy source of summer spending money.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Rideshare drivers taking insurers for ride?

Falsely billing personal auto insurers could jeopardize passengers
Continue reading

Uber’s agreement last week to stop misclassifying its drivers as independent contractors in Alaska raises more than a few fraud issues involving ridesharing.

Whether or not Uber was scamming in Alaska, you have to start thinking about other plots that personal-auto insurers, especially, will need to start watching for.

When applying for auto coverage, rideshare drivers could easily lie that they’re using their car for personal use only. Admitting they do ridesharing could dramatically hike their auto premiums or even lead to coverage denial. So now we have application fraud, and the genesis of potentially expensive claims scams farther down the road (literally).

Next come false claims. Maybe the car crashes while giving a passenger a ride. Two cars are damaged and a passenger gets whiplash. The driver lies that the incident happened while using his car for a personal chore.

He hides the evidence by routinely turning off his rideshare app as soon as he starts the commercial ride, or even before. The app thus doesn’t record anything, giving the driver plausible deniability. The driver then makes the claim with his personal auto insurer, hoping the insurer won’t investigate deeply enough to uncover his lies. The personal-auto insurer could be stuck with large injury and repair claims.

Rideshare firms frequently offer commercial auto coverage of their own. Except that there are serious questions about whether the policies are as comprehensive as the drivers’ personal auto coverage. Deductibles also may be lower for personal coverage. Drivers thus may be incentivized to default what should be commercial auto claims to their personal auto insurer.

Much of the evidence in fraud cases will come from forensics on the driver’s rideshare app. When was it turned on or off, and at what point in the ride process?

This is more than abstract ruminating. Scamming is underway. Rideshare drivers often talk about how they manage scams in blog-related discussions. They also offer each other advice about how to discretely fleece auto insurers in applications and claims. You’ll learn more from experts at Parr Law P.C. in the upcoming fall issue of the Journal of Insurance Fraud in America.

So insurers need to develop plans for dealing with rideshare scams. They’ll need to figure how to ferret out cons during applications and policy renewals. And develop strategies for seeing through dirty claims. Policies themselves will need clear wording.

Insurers also should work with state lawmakers and regulators to make sure the legal infrastructure clearly spells out fraud and liability. Rideshare firms should be involved as well so everyone is working to head off fraud.

Rideshares are exploding in cities around the U.S. Rideshare passengers — and there are many — need assurance that they are properly protected if they’re injured in a crash. Same with other motorists who are hurt, or whose vehicles sustain expensive damage. Coverage and justice cannot be delayed or refused over lengthy tussles about whether a rideshare driver is insured.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Dishonest drivers avoid auto premiums

Frustrated states make evasion an insurance crime Continue reading

The Coalition surveyed state laws a couple of years ago to see how states deal with residents who falsely register and insure their vehicles in other states with lower auto premiums. Very few states consider this scheme an act of insurance fraud, we found.

North Carolina is an exception. Drivers must show proof of residence before they can buy auto insurance. North Carolina is trying to head off rate-evasion cons. Drivers in several states falsify North Carolina residence to obtain cheaper auto insurance than in their home states.

Rate evasion is a lose-lose for the victim state where the vehicles are garaged. Honest insurance consumers pay higher premiums to subsidize the smaller pool of drivers. Scofflaws also rob the state and local governments of registration fees or vehicle taxes.

Yet few prosecutors will go after dishonest drivers unless there’s a specific fraud law that makes convictions of violators more likely.

We may be seeing a surge of other frustrated states that have seen enough of dishonest drivers.

New Jersey is about to make life much harder for cheaters by strengthening its law targeting those who use out-of-state addresses to avoid higher New Jersey insurance. The governor signed the bill into law late last week.

New York is on tap tap with companion bills (S 4900/A 7237). The sponsors are well-placed legislators from both parties, suggesting a strong chance of success.

The Coalition is joining with insurer partners to push the legislation into law. Fraud fighters shortly will start a grassroots letter-writing campaign to show legislators in Albany why they should vote “Yes” for passage.

We strongly encourage New York fraud fighters to write their legislators. Let’s push for a surge of legislation that turns this scam into a dead-end street for cheaters.

Yet more states could see bills clamping down on premium evaders. It seems there’s a growing feeling that enough is enough. Let’s turn avoiding auto premiums into a dead-end street.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Stealing health benefits no minor crime

adStealing health insurance benefits is a type of fraud that doesn’t get much attention. It seems innocent to a lot of people. So you list your boyfriend as your husband and get him covered by your employer’s policy. What’s the harm?

People who get divorced often don’t alert their employers that their now-ex isn’t really qualified for health benefits. And then there’s all the people who sign up for Medicaid that really don’t quality, like the doctor and school teacher in Connecticut.

All the same, it’s still cheating. Honest people pay extra for this dishonesty. And it’s dumb to steal insurance benefits because with vast data resources, insurers can easily learn about whether people are really married or whether their income is low enough to qualify for state programs.

The first public outreach effort on the theft of health benefits has been launched by the Insurance Fraud Prevention Authority (IFPA) in Pennsylvania. They’ve created a brochure, TV and radio spots, plus a website describing varied opportunistic frauds committed by consumers and warning people about the consequences. Another fine job by our colleagues in the Keystone State.

Evade the rate, lose your car!

Twenty-eight motorists in Lawrence, Mass. had to find alternative transportation to work Monday morning, thanks to the city’s tough new policy against auto rate evaders. The city towed their cars away during the night for failing to properly register them. Most had registered their vehicles across the border in New Hampshire to escape the higher insurance rates in Massachusetts.

Rate evasion is a way of life in many areas with high insurance rates. In New York City, if you have a grandmother in North Carolina — and she’s willing to let you use her address to insure your car — you can save thousands of dollars.

TowtruckGeographical rate evasion is fraud pure and simple. Insurance consumers in both states are harmed by rate evasion. In the higher-rate jurisdiction, the pool of insurance money is reduced, increasing everyone’s costs. In the lower-rate jurisdiction, the costs of the rate evader’s accidents are charged against that state, making it appear to be more costly for insurers, so when new rates are set, they are increased as well.

It’s a positive sign that law enforcement is getting tougher on rate evaders. More jurisdictions should follow the example set by Lawrence.

Auto underwriting fraud rising

Auto insurance policyThe latest study by Quality Planning Corporation says premium “leakage” in auto insurance totaled a whopping $16 billion last year. Not all of this is fraud, of course. Mis-rating of policies and missed opportunities to collect the proper premium account for a large part.

Still, the report suggests a slight increase in the incidence of people lying about where their cars are garaged. Plus, up to two percent of all auto policies contained an unrated driver, according to the study. Some people apparently are coping with the economic downturn by failing to include teenage drivers on their policies.

“Some policyholders misrepresent facts, and others don’t report lifestyle changes. Others boldly commit fraud,” the study says.

Underwriting fraud remains the poor cousin to other forms of auto insurance crimes. Some insurers aren’t as aggressive as they should be, and most law enforcement treat premium fraud scams lightly. In a few states (New York comes to mind), legislators won’t even criminalize the practice of lying on policy applications.

So with the bad economy and few consequences to committing this fraud, it should surprise no one that underwriting fraud appears to be on the increase.

Lie in Kentucky, go to jail

Kentucky jailApplicants for insurance in Kentucky have been put on notice: Lie and you may lose your freedom.

A woman who applied for a homeowners policy has been charged with failing to fully disclose her claims history. She faces five years in prison and a $10,000 fine.

Sadly, such cases are rare across the U.S. Fraud bureaus and prosecutors usually don’t consider them a priority. If more did, they would send a stronger signal that honesty is important. Underwriting fraud is basically a fairness issue. The cheats cause honest policyholders to subsidize the premiums of the dishonest.

Hats off to the Kentucky fraud bureau for taking this case. Details are below.

Allegedly falsified claims history information on application

FRANKFORT, Ky. (June 11, 2008) – A Corbin woman is in custody after being indicted on a felony count of insurance fraud. According to court documents, Christine V. Young filled out an application for homeowners insurance coverage with State Farm Insurance Company stating that she and other household members had no losses for the past three years. She also allegedly stated that no insurer had refused to issue or renew coverage during that time period.

An investigation by the Kentucky Office of Insurance (KOI) Fraud Investigation Division found that another insurer canceled Young’s homeowners policy due to misrepresentations on the application. In addition, Young was directly or indirectly involved in at least four fire losses and one major theft loss during the three-year period.

She was arrested by a KOI fraud investigator and the Corbin City Police and is being held in the Knox County Jail. If found guilty, she faces a maximum sentence of five years in prison and a $10,000 fine.

NYC school vans insured in Pennsylvania?

school vansLast night Fox News in New York (Fox5 – WNYW) aired an investigative report about a van service for the city school system that appears to be committing underwriting fraud.

Investigative reporter John Deutzman found that vans that transport kids to and from a magnet school in Brooklyn are licensed and insured in Pennsylvania. Deutzman noted that local officials are powerless to do anything about the fraud, but that a state investigation is underway.

Watch the report on the station’s website. It’s very well done. Deutzman, by the way, received an award from the New York Alliance Against Insurance Fraud in 2006 for a great piece on auto underwriting fraud in New York. The fraud-fighting community needs more journalism like this.

Update (January 23) — The guy in the photograph above — along with five members of his family — was charged today with using a Pennsylvania address to falsely obtain driver’s licenses, vehicle registrations and insurance coverage for a total of 14 vehicles, including vans linked to an illegal school bus operation in Brooklyn, NY. The charges were brought by Pennsylvania AG Tom Corbett.

Stealing health care from the poor

djWhat kind of person lies about his income so he can receive health benefits? That question came to mind as I read the story out of Texas about scores of people who pretended to be poor so they could qualify for social programs for the indigent. Most of these people appeared to be well off. Good Morning America ran a segment on this story yesterday for which I was interviewed.

Stealing health benefits is nothing new. We’ve been following a bunch of cases around the country like the Idaho man who pretended to be his girlfriend’s husband so he could get his surgery covered by her insurance company. He was sentenced to seven years in prison in March.

Two weeks ago a housing offical in Utah was indicted for illegally putting her ex-husband on her health plan. And in Tennessee, a state senator and insurance agent was accused of being enrolled in the state program for the poor for the last ten years.

Most state health programs for the poor don’t have enough resources to cover every eligible indigent person, meaning that people who steal health benefits are pushing truly needy people out of the system. I hope the judges keep this in mind come sentencing.