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Auto insurance fraud is an expensive problem that costs insurance companies millions of dollars each year. As those costs build up, they are passed along to consumers in the form of higher rates for everyone.

Over the past few years, scams have become much more frequent. According to the Coalition Against Insurance Fraud, there was an average of nearly one insurance fraud arrest or conviction every day through the first nine months of last year.

Types of auto insurance fraud

There are a number of types of auto insurance fraud, ranging from small-scale embellishments made on legitimate claims to large operations that involve dozens of cases.

One of the most common types of auto insurance schemes is paper scams. In these cases, no accident actually occurs, but drivers conspire with appraisers, auto mechanics or repair shops to provide false documents, billing the insurance company for repairs that never actually took place.

Other people actually inflict damage on their own vehicle in order to file claims for the damage, or attempt to pass old damage off as new by claiming they were involved in a hit-and-run incident.

Finally, some others involve innocent victims by staging accidents with unsuspecting drivers on the road. Through these incidents, they can sometimes not only collect for damages to their vehicle, but also for medical expenses. Those medical issues can sometimes be embellished by the perpetrator or a medical employee who is in on the auto insurance fraud scam.

Effects of fraud on auto insurance in the USA

Residents in many states are feeling the expenses from auto insurance fraud in the form of higher premiums. As more fraud occurs, auto insurance in the USA may continue to increase, as insurers try to cover the costs of their payouts.

In addition to added costs for residents, fraud also can potentially make the roads more dangerous. Those attempting to stage accidents put the lives of other drivers on the road at risk, which is why many states have introduced auto insurance crackdown measures, including laws making fraud a felony.

Recent auto insurance crackdown

As auto insurance fraud becomes a more expensive problem for many states, some are creating stricter laws that include harsher punishments for those who attempt to defraud auto insurance companies. However, experts say some of these laws are more effective when the fraud is perpetrated by individuals and may not help as with extensive schemes involving those in insurance related fields, including mechanics and medical staff.

In order to combat the effects of large-scale car insurance fraud schemes, many cities across the country have begun conducting sting operations. The efforts have been successful in some areas. Recently, a major operation in Miami-Dade County landed 25 people in handcuffs, including three doctors.