Besides the weather, insurance fraud is one of the biggest contributors to rate increases. It effects everyone and it’s hard to explain that to clients.
Client-“Why did my rates increase?”
Agent-“Insurance Fraud is on the rise”
Client-What does that have to do with me? I’ve never defrauded anyone”
Allow me to give a few examples of how insurance fraud happens and how it effects us all.
Needing a New Roof After a Hail Storm
This is Texas. In Texas, we have a lot of hail storms. In 2016 and 2017, Texas had some of its worst hail seasons in history. New Roofs of Frisco is out early the next morning after an extremely bad storm the night before. It seems like you can’t drive three houses without seeing a home that needs a roof replaced. It’s a tough market for roofing companies because everyone is out offering “the best price”. New Roofs of Frisco decides they need a competitive advantage and offer to pay the homeowners deductible.
This is insurance fraud. In turn, they add the cost into their quote that gets turned into the insurance company. New Roofs of Frisco does this all year, along with many other companies in the area. The insurance companies realize there is an increase in the cost of a new roof in Frisco and increase rates for the entire metroplex.
Workers Compensation After Lifting a Heavy Box
Bobby Jones works for a General Contractor in Lewisville, Texas. Bobby has been loading material into the truck all morning. He is on the last box and decides he doesn’t need to use the dolly. Bobby lifts with his back ,instead of his legs,and “pulls a muscle”. After filing a Workers Compensation claim, Bobby is told that he needs to stay home and rest. Bobby decides his back doesn’t hurt as much and goes to Six Flags with his kids. Bobby is collecting Workers Compensation benefits while not really injured.
This is insurance fraud. The insurance company notices there is a rise for Workers Compensation claims in the area and increases rates for several states.
Repairing a Vehicle After a Crash
Tom is driving down I-35. It has rained all week and is 22 degrees. Tom drives over black ice and spins into the guard rail. He’s okay but his car is severely damaged. Tom never files a claim so he keeps his deductible at $1,000 to save money. After the insurance company inspects the vehicle, Tom is informed that he has $23,000 in damages to his new truck. Franks Body Shop of Austin offers to pay Tom’s deductible since its so high. Franks Body Shop adds the $1,000 deductible into the repair cost.
This is insurance fraud. The insurance company notices that the cost to repair certain types of trucks is increasing, along with the risk in Austin. The insurance company increases rates for truck owners and residents in the Austin area.
I hope this helps you to understand what insurance fraud is and how it effects everyone. Feel free to reach out to me if you have any questions.
Thanks for reading!