By Autumn Cafiero Giusti
Staged auto accidents and “crash for cash” schemes cost the insurance industry about $20 billion a year and result in higher auto insurance rates – an average of $100 to $300 a year, according to the FBI.
As a result, members of the law enforcement and insurance industries have devoted more resources to this kind of fraud in the past decade.
“Staged crashes are very common, very costly and very persistent in many urban areas of the country,” says James Quiggle, spokesman for the Coalition Against Insurance Fraud. “As a result, they’re driving up auto premiums for drivers everywhere, because fraud is a past-along cost that honest policyholders regrettably pay for.”
Fraudulent crash rings bilk auto insurers out of billions of dollars a year by billing for injuries that can be difficult to diagnose and dispute. “It’s very common for staged crashes to be organized by rings that create what amount to fraud factories,” Quiggle says. “Their goal is to manufacture, in assembly-line fashion, large volumes of false claims for bogus treatments involving phantom injuries by passengers who are coached how to act injured.”
According to a 2015 study by the Insurance Research Council, automobile claim fraud and “buildup” — which the Insurance Journal defines as the “the inflation of otherwise legitimate claims” — added between $5.6 billion and $7.7 billion in excess payments to auto-injury claims paid in 2012. Claims appearing to have fraud and/or buildup were more likely than other claims to involve chiropractic treatment, physical therapy, alternative medicine and pain clinics.
Tom Mulvey, assistant vice president for special investigations unit and claim services for ISO/Verisk Insurance Solutions, says it’s important to make the distinction between a “staged” accident and a “caused” accident. A “staged” accident refers to an accident in which all of the vehicles involved took part in planning the crash. In a “caused” accident, only one party knew the accident was going to happen.
Recent statistics on national trends are limited, although fraudulent accidents overall appear to be on the rise in some states. In Florida, for example, personal injury protection fraud arrests, which include fraudulent accidents, rose from 318 in fiscal year 2006/2007 to 402 in 2014-15, peaking in 2012-13 at 651 arrests, according to the Florida Department of Financial Services’ Division of Insurance Fraud.
Mulvey says that in places where fraudulent accidents appear to be on the rise, it’s important to keep things in context.
“One thing to keep in mind: Are the accidents becoming more common, or is law enforcement and the insurance industry just getting better at detecting them?” he asks.
Mulvey cites significant development in the area of insurance fraud detection just in the past five to 10 years. “I think the insurance industry has gotten a lot better at detecting these issues. Almost every state has become active with an insurance fraud bureau, and those types of organizations have come a long way in working on those cases,” he says.
According to Florida’s fraud division, staged accidents used to be a major component of PIP fraud in Florida, but they have dropped dramatically in the past few years because of enforcement efforts and legislative changes. For the current fiscal year, these accidents account for 7 percent of the total PIP referrals the state has received.
Being able to combat these instances of fraud, Mulvey says, is important to keeping insurance costs down for consumers.
“To the common driving public, this stuff costs you a lot of money,” he says. “If someone waved a magic want and there was no more auto insurance fraud, the rates would be less.”
The prevalence of auto insurance fraud, which includes staged and caused accidents, varies widely from state to state, according to the IRC.
But the states with the highest rates included:
• Florida (31 percent)
• New York (24 percent)
• Massachusetts (22 percent)
• Minnesota (22 percent)
These types of crashes tend to be an urban phenomenon, Quiggle says.
“It’s more plausible for crooks to lodge large volumes of injury claims in an urban area where you have more traffic density and more chances of car accidents,” he says. “You’ll see them in rural areas, but there’s just less money in it.”
As a result some parts of the country are more prone to staged and caused accidents than others. California, Florida, Massachusetts, Minnesota, New Jersey, New York and Texas rank among the traditional hotspots, Quiggle says.
“These are very densely urbanized areas,” he says. “You have large ethnic populations in many cases. People from different countries are very common participants in crash rings.”
In South Florida, for example, there are several rings divided among their participants’ country of origin and include Haitians, Jamaicans and immigrants from Central America.
In New York, the crime rings include Russians and other members of former Soviet republics, Quiggle says.
“They’re very insular. They talk a common foreign language and can be hard to penetrate,” he says. “Often, entire families and neighborhoods get involved.”
According to the National Insurance Crime Bureau, these types of accidents are the most common in the dozen states that have no-fault auto insurance laws on the books. The average no-fault claim – including those from staged and caused accidents – rose 47.7 percent between 2004 and 2009, the most recent figures available to the public.
“The nature of the no-fault system makes it pretty easy for these kinds of accidents to proliferate,” says Frank Scafidi, spokesman for the National Insurance Crime Bureau. “If they can go to a state where the system allows this kind of activity without having to prove fault, it just makes it easier for them. This puts the innocent motorists at risk, certainly more in those states than others.”
Michigan is among the states with no-fault accident laws, and as a result, fraud instances have plagued the state, says attorney Todd Berg of Michigan Auto Law. “No-fault auto insurance fraud, whether committed by fraud rings or auto insurance companies – is a serious problem here in Michigan,” he says.
Berg cites figures from the National Insurance Crime Bureau, which reported that questionable medical claims for personal injury protection benefits in Michigan increased 313 percent between 2009 and 2011, and 114 percent in Detroit during the same period.
One of the more common forms of no-fault auto insurance fraud in Michigan are the fraud rings that involve “runners” and unethical lawyers and doctors. For instance, in 2013, State Farm filed a federal lawsuit accusing medical facilities, doctors and lawyers of charging the auto insurer, under Michigan’s no-fault system, for medical services that were either not performed on auto accident victims, or were performed but according to a fraudulent protocol.
Knowing what to look for
Crash rings typically rely on the same scams over and over, and experts say drivers should keep an eye out for certain tactics as red flags.
“It’s like a continuous loop movie. There are only so many kinds of scams with these staged accidents,” Scafidi says.
According to the FBI and other experts, some similar scams to look out for include:
• The drive down: This involves the “friendly” driver who waves you out of a front-end parking space. “As you pull out, the driver may suddenly pull out in front of your path and cause a T-bone collision,” Quiggle says.
• The sideswipe: As you round a corner at a busy intersection with multiple turn lanes, you drive slightly into the next lane. The car in that lane steps on the gas and sideswipes you.
• The T-bone: You’re crossing an intersection when a car coming from a side street accelerates and hits your car. When the police arrive, the driver and several planted “witnesses” claim that you ran a red light or stop sign.
• The swoop and squat: A car “swoops” in and cuts off the driver in front of you, forcing that driver to slam on the brakes. You try to stop, but there isn’t enough time and you end up rear-ending the car in front of you – the one that had been intentionally “squatting” there.
Quiggle cautions that drivers make themselves a target by allowing distractions.
“Crash rings often cruise roadways looking for drivers who fit the profile of a distracted motorist,” Quiggle says. “This includes people on their cell phones, or parents with a child who may be distracting them from paying full attention to the road. Seniors sometimes are targeted because they are perceived to be easily confused, uncertain of the facts and not fully alert to road conditions.”
Some crash rings will even go to great lengths for a set-up. They have been known to hire people off the streets to act like injured passengers and coach them on how to mimic the signs of whiplash.
“They’ll learn how to grimace and use Oscar-like acting abilities,” Quiggle says.
Quiggle says the word “whiplash” should be a red flag if there’s any suspicion that an accident was set up.
“Whiplash makes it so much easier for crash rings to fake injuries,” he says. “These are soft-tissue muscle injuries that you can’t objectively measure using X-rays, like you could with a broken arm.”
And give extra scrutiny to low-impact crashes with very little damage, but with a car full of people who suspiciously start acting injured, Quiggle says. “Why are five people suddenly piling out of a car and moaning and groaning about a 3 mph fender bender in a parking lot?” he asks.
What to do if you’re hit
Even if a motorist is involved in what appears to be a staged or caused accident, there are still several defenses that drivers can employ.
Experts say the best tool drivers can use if they’re involved in one of these accidents is a camera.
“That puts the entire crew on notice that you’re gathering evidence that could convict them in court if the crash is bogus,” Quiggle says. “It can be intimidating and might even compel them to leave or go away, because you’re suddenly too dangerous and not the easy mark they thought you were.”
Scafidi says crash rings are less likely to pursue a claim when they know there’s a victim who’s got their wits about them. “The bad guys sort of melt away, and you’re just left with wrinkled fenders.”
Drivers should also get the names, addresses, drivers license numbers and contact information for everyone in the other vehicle. “Also, count how many passengers are in the other car,” Quiggle says. “Sometimes, more people will file injury claims than were in the car,” Quiggle says.
It’s also important to call the police and get an official report, even if damage is minor.
“This kind of information can haunt a crash ring that’s trying to manufacture false injury claims against you,” Quiggle says.
If there’s any question as to whether the crash is legitimate, trust your gut, Scafidi says.
“When you’re involved as an innocent driver where things just don’t add up, your instincts are probably the biggest warning sign you can have,” he says.