AAI Backs Schumer Auto Fraud Bill in U.S. Senate

April 12, 2002

The Alliance of American Insurers has voiced its initial support for the Cheaper Car Insurance Act, which would make auto fraud a federal crime punishable by as long as 15 years in prison and as much as $100,000 in fines. Sen. Charles E. Schumer (D-NY) has said he plans to introduce this legislation shortly.

“Fraud costs the property/casualty insurance sector billions of dollars a year. Auto insurance is one of the sectors most vulnerable to fraud and the situation is not improving,” David Farmer, Alliance senior vice president of federal affairs, commented. “Ultimately, the cost of this fraud is passed on to consumers in the form of higher premiums. While we will have to review the bill carefully upon its introduction before taking a final position, we applaud Sen. Schumer’s efforts to protect policyholders from criminals.”

Alliance Director of Claims Kirk Hansen added, “Phony accident scams are a problem in every major city in the nation. The crooks involved with insurance fraud may include unscrupulous doctors and corrupt lawyers. They range from cheats to organized criminals. There has been a proliferation of dishonest medical clinics, particularly in large metropolitan areas, that serve as mills specializing in the treatment of bogus injuries tied to automobile accidents.”

As outlined by Sen. Schumer, the bill would provide for a three-tiered penalty system, including five years in prison for the first offense, 10 years for the second offense, and 15 years for the third. The Department of Justice would create “best practices” for states to use in licensing automobile body repair shops and medical treatment providers, making it more difficult for individuals in those industries to commit insurance fraud.

The department would work with U.S. attorneys to aggressively investigate chop shops and salvage yards. In 10 cities most affected by automobile insurance fraud, special U.S. attorney’s office units would be created.

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