A Day Late and a Dollar Short


By: Jessica Samford

This week, a Pennsylvania man was charged with insurance fraud for buying car insurance after he had a car accident.  This news sounds somewhat similar to the amusing “State of Regret” commercials State Farm ran a few years ago: bad driver Jerry, after driving his car up a pole, calls his former agent Jessica, crying about how much he misses her after switching to a less-responsive company.  Except in this case, the man had no coverage at the time of his accident, bought coverage from SafeAuto after the fact, and reported that the accident occurred about an hour after obtaining the policy, according to news reports.

The basic concept behind insurance is that there is a risk of an unplanned, unintended, or unanticipated “fortuitous” event that, as far as the insurer and the insured are aware, is dependent on chance. This is known as the “fortuity” principle.  The fortuity principle is implied in nearly all insurance policies, even if not explicitly written into the terms.  It follows common sense that there is no risk that there will be a loss if the loss has already taken place.  Even if the man in Pennsylvania lacks such common sense, his actions could constitute fraud.  His potentially fraudulent claim for almost $4,000 in damages may be a drop in the bucket compared to recent estimates of fraudulent claims nationwide—$80 billion a year, according to estimates published by the Coalition Against Insurance Fraud.

Fraudulent claims both increase the cost of insurance and decrease the profitability of insurance companies, which can harm consumers and carriers alike.  Being able to detect and avoid paying fraudulent claims is a key component of insurance claims handling.  In this instance, the circumstances of the accident immediately raised suspicions for the carrier to safely avoid paying the fraudulent claim—if only fraudulent claims were all that easy to detect.