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The Reasoning Behind High Auto Premiums
By: Jaci Buscher | Date June 4, 2015
Unless you're one of the lucky few, it happens every year: you receive your auto policy renewal
and notice an increase in your premium for the new term. There are many reasons for this
increase, but one of the largest, yet least addressed, causes is the billions of dollars' worth of
auto claim fraud and build up that occurs every year.
The Insurance Research Council took a closer look at this problem and found some interesting
statistics. They found that in 2012 alone, auto claim fraud cost policyholders somewhere
between $5.6 and $7.7 billion in the United States. These excess payments add up to somewhere
between 13 and 17 percent of total auto premiums paid during the year! The most common
type of abuse was buildup, which refers to claims that are in fact legitimate, but are inflated by
the policyholder in order to gain excess payments from the insurance company. The study was
based on data from 35,000 auto injury claims spanning across twelve different insurers.
The study also found that claims involving chiropractic treatment, physical therapy, alternative
medicine, and the use of pain clinics were the ones most likely of being fraudulent. Furthermore,
it found that the states with the highest rates of fraudulent claims were Florida (31%), New York
(24%), Massachusetts (22%), and Minnesota (22%).
In total, it seems that high auto premiums are a classic case of punishing the masses because of
the bad decisions of a few. However, the few seems to be getting larger and larger by the year.