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Tuesday, 30 April 2019 16:58

Reducing the Cost of Fraudulent Auto Claims

Written by William Pagan,



The old adage goes, “A picture is worth a thousand words,” and that is especially true when it comes to filing insurance claims.


Proof of loss, photos of a damaged vehicle or property, is critical to determining the loss and value of a claim.


New York Regulation 79 is helping to fight auto insurance fraud by documenting a vehicle’s existence and physical condition, plus vehicle options and accessories to detect and deter fraud, which targets approximately 8 percent of the heavily fraud-prone segment of used cars.


Preventing Fraudulent Claims


Photo inspections continue to have a strong anti-fraud impact. Inspections identified about $1.8 billion in pre-existing vehicle damage from 2014 to 2018 in New York, based on research by the Carco Group.


The discoveries saved insurers from paying $128 million in false claims on these vehicles. The ROI is compelling: $34 of false claim payouts are avoided for every $1 invested in fraud prevention through pre-insurance inspections, and consumers are equal beneficiaries of downward pressure on the auto premiums they pay.


Many consumers find insurance fraud a convenient and easily rationalized crime as revealed through attitude research conducted by the Coalition Against Insurance Fraud:


• Twenty-four percent of consumers say it is acceptable to pad insurance claims to make up for the out-of-pocket deductible.


• More than 66 percent of consumers believe insurance fraud happens because people believe they can get away with it.


Yet an effort is underway by some auto insurers to water down photo inspections in New York---even though Regulation 79 targets only 8 percent of highly profiled fraudsters.


Diminishing the impact of Regulation 79 would allow fraud losses to rise. Fraudsters would be emboldened to step up their criminal activities in the face of diluted detection and deterrence. In turn, drivers could face premium increases thanks to mounting fraud losses against auto insurers.


So what is driving this movement? We believe certain automobile insurers and allies want to simplify their customer pipelines in a rapidly tightening auto marketplace that is seeing unprecedented competitive challenges for policyholder acquisition and retention.

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