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 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.
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.
Geographical 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.
The 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.
Applicants 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.
CORBIN WOMAN INDICTED FOR INSURANCE FRAUD
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.
Last 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.
What 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.