Posted on 09 Feb 2010
Last Friday, U.S. Senator Charles E. Schumer announced that he is introducing the Cheaper Car Insurance Act of 2010 that would set up new federal penalties for auto insurance fraud. The legislation was originally introduced in 2004.
This legislation comes on the heels of a new report which reveals that auto insurance fraud is on the rise in New York, along with drivers' insurance rates. Suspected fraud cases in New York have jumped 33% since 2006. The rise in fraud cases has lead to auto insurance rate hikes averaging 6.3% last year alone. Schumer's legislation will go after criminals who perpetrate the fraud, requiring them to foot the bill. It will also impose harsh penalties on criminals involved with auto insurance fraud.
“This Cheaper Car Insurance Act of 2010 sends a very simple, very strong and very clear message to anyone even thinking of committing auto insurance fraud: expect to be arrested, expected to be tried in federal court by federal prosecutors, and don’t make any plans for the next five to fifteen years,” Schumer said. "Auto insurance fraud is a serious business that causes substantial damage to drivers and business, and until we tackle this problem head on insurance rates will continue to rise. I will fight to see that this legislation becomes law and so that New Yorkers can see their insurance rates stop rising.”
Auto insurance fraud is rising rapidly in New York State. Companies have flooded the state Insurance Department with 13,433 complaints of suspected no-fault auto-insurance fraud last year, which is up from the 10,117 incidents just three years prior. Auto-insurance scams are being reported across the state, but are most prevalent in the Bronx and Brooklyn. As cases of auto insurance fraud have increased, payouts per auto industry injury claim have as well. They’ve risen 55% since 2004 and are now more than double the national average. Last year's cost per claim averaged $8,690 - up from $5,615 in late 2004 and more than twice the current $4,152 U.S. average. Some estimate say that scams cost insurers and drivers a whopping $229 million last year alone.
The Cheaper Car Insurance Act of 2010 will set up new federal penalties to combat auto insurance fraud. Specifically, Schumer’s legislation would impose fines, decided by a judge, of up to $100,000. If the cost of the fraud exceeds $100,000, the fines can cover the fraud’s total cost. It would also lock up perpetrators for insurance fraud rings and allow auto insurance companies to require inspections for cars they suspect could be used for fraud before insuring them under certain circumstances to prevent insurance fraud by criminals who buy cars in bad condition and falsely claim that they were damaged in a car accident. Schumer’s proposal would create a three tiered system of harsh penalties including jail time for the insurance fraud ring masterminds, organizers, and participants:
·Participants: The proposal makes it a separate crime to serve as a “runner,” “capper” or “steerer” – such as a person who gets paid to simply set up an auto accident by cutting off another driver, a person who directs the victim of an accident to a particular health clinic or doctor knowing that they are involved in the insurance fraud or a person who promises someone money in exchange for lying about the circumstances of a car accident or car theft in order to fraudulently obtain insurance money. These participants would face up to 5 years in jail for each offense.
·Organizers: The proposal makes it a separate crime to employ or solicit a “runner,” “capper” or “steerer” to help set up fake auto accidents or make false auto insurance claims for the ringleader of an auto insurance scam. These fraud ring organizers would face up to10 years in jail for each offense.
·Masterminds: The proposal makes it a separate crime to conceive of and mastermind an auto insurance scam. Under Schumer’s proposal, the leader of an auto insurance scam would face up to 15 years in jail for each offense.
Schumer added,” Auto fraud hurts everyone whose car insurance bill goes up even though their car goes down in value. It hurts every small business that can afford to buy more delivery vans but can’t afford to insure them. Fraud hurts vacationers and business travelers to New York who don't understand why car rental insurance rates are so much higher here than in other cities and states. Fraud hurts us all, and it’s time to strike back."