Auto Insurance Fraud on the Rise, officials say

Investigators know the tricks of insurance fraud trade

Insurance officials say they have noticed an increase in fraud as people become desperate in the tough economy.

By Laura A. Bischoff
Staff Writer


Insurance fraud investigators weren’t born yesterday. They know the difference between when an amateur and a professional thief dumps a car.

The professional removes the global positioning system, airbag, high-end stereo and other valuable parts before setting a stolen car ablaze or rolling it into a pond or lake.

The amateur leaves those items inside the car. And sometimes the rookie makes other mistakes, such as torching the vehicle in view of a surveillance camera, or reporting the car stolen with eyebrows singed.

Joel Demory, fraud chief with the Ohio Department of Insurance, said investigators see plenty of “boneheaded” moves by people looking to dump their cars for insurance payouts.

State insurance officials say they have noticed that insurance fraud, through staged thefts, is on the rise as people become desperate in the troubled economy.

The state fire marshal reports that between 2004 and 2007, Ohio saw a 62.3 percent increase in vehicle arsons.

Other states have reported measurable increases in auto give-ups in recent years. New York reported a 25 percent increase between 2007 and 2008, New Jersey saw a 59 percent increase in suspected vehicle arsons between 2004 and 2007, and California reported a 40 percent increase in vehicle give-ups in fiscal year 2008 compared with fiscal year 2007.

“If it looks like a fake car theft, acts like a fake car theft and quacks like a fake car theft, then it’s probably a fake car theft,” said James Quiggle, spokesman for the Coalition Against Insurance Fraud, a consumer and insurance interest group.

Investigators consider whether the owner was behind on the payments, if they claimed high-end equipment was in the car, whether they recently checked on their insurance coverage, whether the owner has all the keys and if there are signs of forced entry on the car.

They also talk to neighbors and review surveillance camera footage from where a car was reported stolen and where it was found.

Sometimes it can take six months to investigate and prosecute an insurance fraud case, according to Demory.

But an insurance fraud conviction for dumping a car worth more than $5,000 carries a maximum penalty of 18 months in prison and a $5,000 fine in Ohio.

Quiggle said a recent survey found that during the last decade, American’s attitudes toward insurance fraud have become more tolerant. People see bilking big insurance companies out of a few thousand dollars as harmless, he said.

“Morally, these people find it easy to rationalize torching their car, because they don’t view insurance fraud as a real, live crime,” Quiggle said.

“They don’t consider the cost of these crimes are being passed on to all the policyholders in the form of higher premiums.”