Everyone knows about the professional criminals who are now working up and down the country to bilk insurers out of their money. They stage accidents, fake injuries and receive several billion dollars a year for their trouble. Why, you ask, do they get away with this. The answer comes in two parts. The first is at state level. As you might have noticed, almost all states are running deficits and are under pressure to find savings – for some reason, no state wants to be seen raising taxes. This means even essential services are being cut. So when it comes to law enforcement, where does a Police Chief spend his reduced budget? What are the priorities? Well, we all want to feel safe so a focus on violent crimes like robbery and burglary wins votes in the election. So-called white collar crime takes a back seat. That means local police forces only investigate fraud when it’s really serious, i.e. there’s a lot of media coverage. The FBI are interested in anything crossing state lines and there is a task force set up to deal with insurance fraud. But this is a drop in the ocean when you consider how many billion dollars are involved every year.

The second reason is that you are not exactly overjoyed by the prospect of better fraud detection. Just imagine the sequence of events. Insurance companies have to recruit and train investigators to work alongside claims adjusters. This immediately boosts the insurer’s costs which get passed on to you in higher premium rates. Now all these eager-beaver investigators finish their training and they are released on to the current files. Suddenly everything slows down as these investigators decide whether there’s anything fishy about your claim. How long are you going to put up with someone poking around your claim to decide whether you really did suffer whiplash in that accident? At what point do you start complaining? It’s possible, of course, that these investigators may detect real fraud. If so, the savings they make could start paying their salaries and the premium rates would come down. Well that’s the theory, anyway, and we can all dream.

This leaves all those little frauds. Now we have pay-as-you-drive black boxes, this does away with the most common which was people lying about their mileage. Honest drivers with low mileage can now enjoy their justified discounts. Everyone else can go back to paying the proper rate. But this still leaves about $15 billion in other problems. You would be amazed (well, that’s probably an exaggeration) at the extent to which people lie. They forget to tell the insurers exactly who will be driving the family car, or they edit the driver’s experience, age or marital status. Relatives suddenly develop membership of clubs and affinity groups which produce discounts, and all this is before we get to those who forget to mention they are using their vehicle in a business. Yes, these are only small frauds, only barely dishonest really. But the industry estimates it loses $15 billion a year because of these little lies. That’s $15 billion we all have to cover with higher car insurance rates. So, be honest, what would you prefer: everyone telling the truth and most paying lower rates, or higher car insurance quotes to cover this continuing dishonesty?