Auto premium evasion
Policyholders are not completely innocent when it comes to fraud.
The Insurance Information Institute, a New York-based trade group, says some customers deliberately mislead insurers by using a false address from a lower-premium area when registering their vehicles.
A related auto insurance fraud is deliberately failing to add a new driver in the household, typically a teenager, to the family policy.
The institute says it's estimated that these sorts of lies and omissions cost the auto insurance industry as much as $16 billion a year.
In theory, premium evaders could go to jail for fraud, but it's more likely they'll lose their auto insurance coverage, says Thomas J. Simeone, a Washington, D.C., lawyer who specializes in liability issues.
"Any intentional misstatement on an insurance application can definitely lead to a policy being canceled immediately and a claim being denied," says Simeone. "Moreover, the insurance company may seek to recover any previous claims paid before uncovering the false statement."