Help Stop Staged Accidents From Raising Your Insurance Costs
According to the FBI, staged auto accidents account for approximately $20 billion a year in losses. This type of insurance fraud is particularly harmful to the insurance companies that must pay out liability, disability, medical and other types of claims.
All of this may sound troubling, but what does it have to do with noninsurance businesses? Insurance fraud raises rates for everyone and generally increases your company’s insurance costs. And if your employees either stage accidents or are victims of staged accidents while driving for business purposes, your company could suffer more direct consequences.
Just the facts
Staged accidents are often part of coordinated fraud schemes. In some cases, they may include unscrupulous attorneys and “medical mills” — groups of doctors and other health practitioners who prescribe unnecessary procedures and bill for unperformed services. In some cases, complicit law enforcement officers (and in at least one large-scale scam, 911 operators) are involved.
These illegal enterprises recruit people to sustain “injuries.” Often, crash victims are innocent individuals recruited off the street and promised a quick buck to act as passengers. In staged crashes, one car usually rear-ends, sideswipes or “T-bones” another. After the crash, the claimants or the attorney coordinating the scam submit a police report documenting it.
Passengers are referred to participating doctors, physical therapists, chiropractors and other specialists. The medical practitioners then write up fake treatment plans and send them to insurers for payment. When insurance payments (or legal damages if a case proceeds to litigation) are processed, scheme participants receive kickbacks.
Actual harm
Aside from the aggravation (and, potentially, real physical injuries) they cause, staged accidents pose a serious threat to your company’s insurance coverage. If an innocent employee driving a company vehicle is involved in a staged accident, you could experience commercial liability rate increases and possible reduction — or even elimination — of coverage. The same is true of your company’s health or disability premiums if a dishonest employee fraudulently files claims.
In fact, insurers may either adjust coverage or withdraw from entire geographic areas where medical mills and staged accidents have caused them big losses. Staged accidents are particularly prevalent in big cities and in such states as Florida, New York, California, Texas and Maryland, according to National Insurance Crime Bureau data.
Your business might also be sued for the “pain and suffering” of so-called victims. If your insurance coverage is inadequate, you could incur significant out-of-pocket costs.
Your role in prevention
To help protect your business, establish a company vehicle use policy that documents zero tolerance for intentional involvement in insurance fraud. Also ensure that authorized drivers meet all requirements under your insurance coverage. And train employees who drive on company business on what to do if they’re involved in a collision — for example, wait for the police to arrive, document accident details, and, if possible, obtain witness contact information. Employee drivers should be required to inform someone in your company immediately.
You may also want to strengthen internal controls. For example, conduct appropriate background checks on employees with driving roles.
If an auto accident involves injuries or requires costly repairs, work closely with your insurer and attorney. Most insurance companies are familiar with the red flags of staged accidents, such as passengers claiming major medical expenses after what appears to be a minor collision or hiring disreputable lawyers to sue for damages.
Get involved
To help control rising insurance costs, it’s important to take an active role in preventing insurance fraud. If you’re concerned about the legitimacy of a work-related accident, treat the event like any potential fraud and investigate with the support of appropriate legal and forensic accounting advisors. Contact us. We can help you assess fraud exposure, strengthen internal controls and evaluate the adequacy of your insurance coverage.
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