For those who work in the insurance industry, there are so many tales relating to insurance fraud. From slip and falls to arson and murder for life insurance policies, there is no end to the creativity of fraudsters who cost American consumers upwards of $80 billion dollars per year. After narcotics trafficking, insurance fraud is the largest criminal enterprise in the United States. Not surprisingly, the two are often interrelated.
While insurance fraud knows no boundaries, it does appear with greater frequency in some areas more than others. Law enforcement officials say fraud factors into as many as one out of every three auto insurance claims in New York City. The problem may be even worse in Los Angeles, the city that generates the most questionable claims potentially linked to organized crime according to the National Insurance Crime Bureau.
In the recently released insurance fraud thriller, Swoop and Squat, insurance fraud is front and center in the City of Angels. While a work of fiction, much of the plot line was derived from a variety of claims I investigated as an adjuster on the streets of South-Central Los Angeles.
There are two types of fraud classified as “hard fraud” or “soft fraud.” Hard fraud involves the staging of an accident or other form of a claim. It is intentional and well planned, often with connections to organized crime.
Soft fraud, also known as “build up,” is more opportunistic, involving insureds or claimants who will pad an otherwise legitimate claim. This can be anything from burying a deductible to running up medical bills in hopes of inflating pain and suffering awards. In some cases, claimants will go so far as to obtain needless surgeries in order to maximize the value of their claim.
Here are some scams that not only cost the insurance paying public in the form of higher premiums, but can create dangerous situations.
It is estimated that 1.5 million air bags inflate annually, saving thousands of lives. During the repair process, a small percentage are replaced with counterfeit airbags or in the most severe cases, trash is used to fill the void where the bag would otherwise be, putting unsuspecting consumers at risk.
According to the National Insurance Crime Bureau, from 2008 to 2001, insurers reported a 102% increase in suspected forms of staged accidents. As the name implies, a staged accident is one that is orchestrated by a group of participants. The leader is the capper, who serves as the director for this type of production. He uses pawns who will participate with a bullet car and a target car. Often conducted in alleys or vacant parking lots, the bullet will strike the target and the participants in the latter will claim injuries.
In some cases the cars aren’t even run together with the capper, making use of cars with pre-existing damage that may or may not match the description of the loss.
Other scenarios involve unsuspecting motorists. In the “drive down,” the bullet car will lure a motorist into making a left turn, waving them through traffic or an intersection, only to speed up and strike them; all but ensuring the vehicle making the turn will get a traffic citation.
Like a drive down, “wave downs” entice motorists to pull into traffic from a side street or parking lot, only to be struck when the bullet car accelerates.