I live in Boston but have my car registered to my parent’s home in NH, so what?
Insurance companies lose an estimated $2 billion in auto premium annually to garaging fraud. One of the most common forms of premium rating errors occurs when drivers misrepresent their residency and the parking address of the insured vehicle. Some drivers may not realize that this constitutes insurance fraud — and while it may fraudulently “save” drivers money upfront, the consequences can be more severe than expected.
Out-of-State Rate Evasion
A lot of money can be saved by registering and insuring your car in another state. From state to state, accident rates and insurance coverage minimums create large premium cost differences. Therefore, a resident of Florida would have an incentive to register a car in Alabama – the premium will be at a much cheaper rate. In fact, such incentives have led to organized fraud rings. Some will register dozens of cars at a single out-of-state address—in some cases, criminals buy cheaper out-of-state policies and then sell them along with used cars.
In-State Auto Insurance Fraud
In some cases, drivers may realize they can save money by simply lying about the vehicle’s parking address even within the same state. Auto insurance companies base their premium rates on the county or ZIP code where a driver lives, as population density and accident rates are strongly correlated.
A vehicle parked and used in rural upstate New York, for example, does not create anywhere near the same insurance risk as it would, parked and used in New York City. In fact, according to the Quality Planning Corp. report, this scheme was especially prevalent in large urban areas where a vehicle’s garage location makes a substantial difference when it comes to crime rates. In some cases, according to the report, a young driver may continue to list his residence as his parents’ houses in the suburbs, long after he’s moved into the city.
Top Red Flags of Garaging Fraud:
The policy address is a substantial distance from the insured’s known work address.
The insured only provides a PO Box on the application.
The insured has a history of being a transient and moves around frequently.
The insured has a different address on their driver’s license than on the application or registration.
The principal location of the vehicle is a college or university for an extended period of time.
An out of state phone number is provided.
All states allow insurance fraud to be punished by a fine or jail time, although some states’ penalties are stiffer than others.
Rather than sink a bunch of resources into rooting out this kind of insurance fraud, some states and insurance companies take a more passive approach in combination with legal penalties. If an insurance consumer lies about a vehicle’s parking address, that consumer may simply find his or her insurance policy is essentially worthless when it comes time to file a claim.
Even honest drivers deal with the consequences of rate evasion fraud. Rate evaders aren’t paying their fair share — and that means higher auto insurance premiums for all drivers.
How can we prevent garaging fraud?
Initial efforts may begin with a thorough desktop investigation or SmartStart Investigation: we have seen reports where participants in athletic events, such as a road race, show their hometown as Boston, MA while claiming to live in Oxford, MA, which have two very different premium rates. There are plenty of other publicly available places online providing clues or outright evidence of where you are living.
The best tool to combat the fight against garaging fraud has always been will be actual investigator researching and digging for applicable evidence.
Tools such as social media searches, open and closed source database information, utility bills, interviews, etc are still on the forefront of preliminary investigations that should be conducted prior to any EUO or recorded interview.
Other tools such as software products that allow the tracking of vehicle registrations, but most of the software relies on the Insured vehicle passing through a location where a camera that tracks license plates is located. Drive-byes, cold calls, cross-referencing application addresses, with relative addresses and speaking with neighbors, family members overtly and covertly and work addresses are all proper steps to confirm where an insured is residing compared to where they are claiming to reside.
In conclusion, there are a lot of tools that will allow you to gather evidence and prove if there is premium rate evasion fraud or just a complicated scenario ultimately allowing the claims adjuster to make an educated claims decision.