$40 Billion in Insurance Fraud Leading Contributor to Increased Premiums

Staff Report

Tuesday, March 28th, 2023

With the recent effects of historically high inflation, most drivers and homeowners expect higher insurance rates, but many are surprised by just how high those costs have been.

In a recent report, Clearsurance.com revealed some of the reasons behind these increasing car and home insurance rates, which include the following factors:

Insurance fraud costs the industry $40 billion annually and contributes significantly to higher consumer premiums.

Car accident history
Claims history
Higher repair costs
Higher home and vehicle values
Insurance fraud
Traffic violation record
A nationally recognized insurance expert, Melanie Musson, reminds readers, "While policyholders can't control all factors related to increased insurance rates, there are steps they can take to keep their insurance premiums affordable."

Insurance Fraud Costs Policyholders
Insurance fraud costs the industry $40 billion annually and contributes significantly to higher consumer premiums.

While staged accidents, fabricated injuries, and unnecessary lawsuits play a primary role, many people are surprised by how much soft fraud impacts insurance premiums. Something as seemingly insignificant as lying about an address contributes to the expensive repercussions of fraud.

Inflation and Higher Insurance Costs
While car accident and claims histories have been well-known factors that constantly contribute to higher insurance rates, the effects of inflation have been more pronounced in recent months.

Since the Covid-19 pandemic, new and used vehicle prices have dramatically increased, and supply chain issues and worker shortages have contributed to higher repair costs. Since insurance providers are responsible for assuming the risk of covering more expensive vehicles and repairs, they charge policyholders higher premiums.

Weather Events and Ensuing Damages
Catastrophic hurricanes, tornadoes, and wildfires can cause widespread damage throughout regions, costing insurance providers millions of dollars.

These weather-related losses can also change the way providers offer coverage. For example, the risk of hurricane damage in Florida is so high that it has changed the entire home insurance landscape in the state. As a result, many insurers have restrictions on the age of roofs they will cover and even the age of homes they'll write policies to protect.

Money-Saving Steps for Consumers
While consumers can't control the weather, they can take other steps to lower their insurance premiums, including the following:

Apply eligible discounts
Compare insurance quotes and switch providers
Increase deductibles
Make home improvements to minimize the risk of storm damage
Read Clearsurance.com's full report here: Why did my car and homeowners insurance rates increase?