mazda-fail2009 has been a challenging year for most of us. Even though there might have been positives, most of us are looking forward to 2010 and are praying for an upturn in the economy. Too many jobs have been lost and most people have struggled with debt and acquiring loans from banks and other financial institutions.

In these turbulent times it has been more important to check financial portfolios and curb spending. Consumers have been more price sensitive and brokers have struggled to market and sell additional investment products or life cover. On the short term insurance side pricing has become one of the primary factors considered in financial decisions. Consumers have been searching more for ways of finding cheaper car insurance.

But how far would you be willing to go to make a few extra bucks? Would you ever consider crime as an option? I have come across an interesting story by Emily Friedman and Vanessa Weber titled “Bad economy leads to burnt cars and insurance fraud”. This details perhaps the worst type of insurance fraud.

In their article the authors reveal how across the US, desperate Americans are lighting their own cars on fire when they can no longer afford the payments. They then report the vehicles stolen and try to collect the insurance money.

Disturbing trends of burnt vehicles and car insurance claims

Rather disturbing trends reveal that:

  • So many cars are getting lit up in Las Vegas that the city’s Police Auto Theft Unit patrols the roads for burned out cars.
  • The driving factor behind these burnt-out vehicles is the weak economy.
  • During 2009 on one stretch alone, police say they’ve found the charred hulks of at least 70 torched cars.
  • Police helicopters find other abandoned vehicles hidden in crevices and on peaks in the middle of the desert.
  • Police said since the drive to desolate sections of the desert is a one-way mission over harsh terrain, the bottoms of these vehicles are usually torn out before the burn even begins.

Police in the US have pleaded with the public to be aware of the immense dangers of putting their vehicles on fire, saying that the risk of bodily injure far outweighs the potential financial gain.

Examples of insurance fraud

Reference was also made to 2 interesting cases of insurance fraud:

  • A Nevada man suffered second and third degree burns on his arm and hand when he burned his girlfriend’s car when she wanted out of her car payments. He was charged with – amongst other charges – arson and insurance fraud.
  • In California a man could not handle the burden of car payments and then hired a man to steal and burn the vehicle to collect the insurance. He claimed to police that his car had been stolen from a local golf course.

What are the risks in South Africa?

In South Africa vehicle owners are not obliged by law to insure their vehicles. The consumer who struggles with car insurance payments would merely stop paying the car insurance premium and risk all the dangers of driving an uninsured car. It is however also a risk in South Africa that the vehicle owner who struggles to make his monthly payments to the bank could opt to exit this contractual agreement by committing the criminal act of insurance fraud.

The insurance industry will need to be cautious and alert to these disturbing trends from abroad. We will need to create more awareness of insurance fraud, the consequences thereof and the efforts to investigate, find and bring offenders before the full force of the law!

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