The economic downturn is spurring anxious drivers to fraudulently dump unwanted vehicles for insurance money, according to research by the Coalition Against Insurance Fraud.
Officials in nearly a dozen state and local jurisdictions around the U.S. report clear warning signs that so-called owner give-ups are rapidly spreading. The signs include recent increases in suspected vehicle arsons, rising investigations of suspected give-ups, and in some cases a spike in arrests, the coalition reports.
“Insurance fraud normally increases during a troubled economy. The credit crunch, subprime meltdown, higher gas prices and general economic distress have led more drivers to seek a bailout through insurance money. They’re literally being driven to desperation,” said Dennis Jay, executive director of the coalition.
Drivers typically torch their vehicles, sink them in waterways, abandon them in remote areas, or even sell them to chop shops. The drivers then tell their auto insurer that someone stole the vehicle. This is a traditional insurance scheme that is rapidly spiking this year, Jay says.
Among the coalition’s recent findings:
Arrests increased 25 percent in New York, with most happening in the New York City area.
In Ohio, vehicle arsons reached 3,168 last year compared to 2,872 in 2006.
In California, insurers referred 50 percent more suspected give-ups to the insurance department in the fiscal year ending June 30.
In Arkansas, the fraud bureau logged 18 give-ups just in July and August compared to a normal caseload of one or two for the entire year.
State Farm reports a substantial increase in suspected give-ups in Florida, and local law enforcement is seeing a spike in the Miami area.
Insurers and police are on the lookout for these frauds, so it’s a lousy way for drivers to try to get out of a financial jam, says Jay. Getting rid of a car this way likely will result in a criminal record and possibly jail, plus the owner still has to pay the car loan and now has no transportation.