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Anatomy of an Auto Insurance Fraud Scheme

    3 minute read

    You hear about the scourge of “insurance fraud” from reading the newspapers and websites like this one. The Coalition Against Insurance Fraud estimates that a mind-boggling $80 billion in fraudulent insurance claims are filed in the U.S. each year. Much of these costs are passed on to consumers in the form of higher insurance premiums. For instance, the National Insurance Crime Bureau says that about $200 to $300 of your auto insurance premiums are a direct result of fraud and its related costs.

    But even though you’re aware of auto insurance fraud, you may not have a clear picture of what the term means. Chances are, you  may not have much of an idea about how this type of fraud is executed and how insurance companies lose money as a result. With that in mind, here is a close-up look at the anatomy of one auto insurance scam that was recently discovered in New Jersey.

    The Suspects

    Last month, a half dozen people were indicted in connection with alleged insurance fraud in Passaic County, New Jersey. A press release from the Attorney General’s office revealed that the six are charged with participating in a staged accident scheme which ran from March of 2009 through August of last year. Four of the people facing charges are from Passaic; 27-year old Ariel, 26-year old Jonathan, 29-year old Harold, and 45-year old Olivares. A couple from Paterson, 35-year old Husayn and 33-year old Jenny, were also charged by prosecutors.

    The Scam

    Here’s a brief description of how authorities believe this scam was carried out:

    • Olivares recruited Jonathan, Harold, and Husayn  to participate in the ruse along with an unindicted co-conspirator. Husayn persuaded  Jenny to join the group in its endeavor.
    • On April 25, 2009, Olivares got behind the wheel of his Dodge Caravan and was joined by Jonathan, Harold, and Jenny in the vehicle.
    • Olivares then purposely drove the minivan into a Dodge Avenger, which was being driven by an unindicted co-conspirator. Ariel was also a passenger in the Avenger at the time of the crash.
    • After the accident, Ariel was persuaded to participate in the fraud.
    • In the weeks and months after the collision, Olivares, Harold, Jonathan, Ariel, and Jenny all visited medical providers who “evaluated” their injuries.
    • As a result of these visits, insurance claims were submitted to the two companies who insured the vehicles: Mercury Insurance Group and Plymouth Rock Assurance.
    • The suspects and their medical providers then received a total of $78,829 in medical reimbursement payments from the insurers in response to the fraudulent claims.
    • On April 10 of this year, all six suspects were indicted by a grand jury on insurance fraud, conspiracy, and theft by deception charges. False swearing and hindering apprehension or prosecution were also among the charges on which some of the defendants were indicted.

    The Aftermath

    The release does not list the medical providers who were allegedly involved in this scheme. The unindicted co-conspirator’s name was also not revealed, though many assume that this individual is the person who is cooperating with prosecutors in order to convict the six suspects of the charges against them. The entire case originated as part of an investigation into other staged automobile accidents; Olivares is also facing charges in connection with that probe.

    How Insurance Fraud Affects You

    Because of the high volume of insurance claims filed each year, it can be difficult for insurers to ferret out the fraudulent ones before issuing claim payments. Sadly, these schemes drive up the price of auto insurance for everyone in a given area as insurance companies pass along these costs to their policyholders. So if you see, know about, or suspect a case of insurance fraud, you should contact the insurance regulating body in your state to lodge a report.

    Auto Insurance Specialists knows that fraud and many other factors can increase the cost of auto insurance premiums for American drivers. That’s why AIS is dedicated to helping its customers find the lowest prices available on auto insurance policies. Some drivers even wind up saving hundreds of dollar per year just by switching auto insurers. If you want to explore whether you qualify for some of these savings, visit the AIS Web site today or call (888) 772-4247 to get an auto insurance quote.

    Written by Chris Martin

    The information in this article was obtained from various sources. This content is offered for educational purposes only and does not represent contractual agreements, nor is it intended to replace manuals or instructions provided by the manufacturer or the advice of a qualified professional. The definitions, terms and coverage in a given policy may be different than those suggested here and such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.

     [CR1]As advised by our legal reviewer, we will not be publishing last names of those involved in the scheme for liability purposes.