Malvern, Penn. — A new study by the Insurance Research Council, Malvern, Penn, estimates that claim fraud and buildup added between $4.8 billion and $6.8 billion in excess payments to auto injury insurance claims closed with payment in 2007. The excess payments amount to between 13% and 18% of total payments under the five main private passenger auto injury coverages. Excess payments have increased from 2002, when they were estimated at between $4.3 billion and $5.8 billion, or between 11% and 15% of total payments.
The study, “Fraud and Buildup in Auto Injury Insurance Claims: 2008 Edition,” is based on data from more than 42,000 auto injury claims closed with payment under the five principal private passenger coverages. Twenty-two insurers, representing 58% of the private passenger auto insurance market in the Unites Sates in 2006, participated in the study. The IRC closed claim study collected detailed data on injury, medical treatment, claimed losses and total payments, claim handling techniques and attorney involvement. In addition, claim file reviewers were asked to indicate whether specific elements of fraud or buildup appeared in the claims. Because the study involves only claims closed with payment, it likely understates the incidence of fraud and buildup in all claims filed.
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