Rising auto insurance rates are a concern for consumers and insurers alike. auto insurance fraud accounts for
a large part of the rate increases. Two types of auto insurance fraud account for much of the increase. The first
involves the vehicle's owner failing to reveal existing physical damage when applying for insurance. The owner commits a
fraudulent act after obtaining coverage by filing a false claim to cover the pre-existing damage. The second involves
owners who provide false documentation to insure a vehicle that has been junked or salvaged or that exists in title form
only. The owner reports the phantom vehicle stolen and files a claim after law enforcement fails to recover the
non-existent vehicle.
It is an effective and cost-efficient way to reduce the impact of insurance fraud on auto insurance rates without
imposing an undue burden on consumers, insurers or insurance agents. Insurers require pre-inspections prior to
issuing a vehicle policy which prevents insurers who require pre-inspections reduce the costs of fraudulent claims
for all consumers.