Thursday, May 29, 2014

Auto Insurance Fraud Ring Busted In Los Angeles

So far, 17 people have been arrested in California resulting from an investigation into a multi-million dollar insurance fraud operation.  The investigation took place over a four-year period in the Los Angeles area.

Law enforcement has commented that even more arrests are likely.  Auto dealers and insurance companies were the victims of this fraud, all of which were located in or near Los Angeles.  Although these were the targets, we all know that this type of activity affects all insurance customers by causing increased insurance costs.

This fraud involved the purchase of luxury vehicles such as Audi, BMW, Mercedes and Lexus cars with bank accounts and fraudulent credit cards.  The perpetrators would use fraudulent credit cards to make the purchases, or they would make payments for the cars using a bogus bank account, leaving the auto dealership in the red.

Once the purchase was complete, the new owners would then take out an insurance policy on the cars.  Since these are high value vehicles, they would stand to collect a lot of money on them if they were damaged and determined to be a total loss.  As it turns out, these crooks took the newly purchased cars and then deliberately crashed them.  They would then make an insurance claim and pocket the proceeds from the collision settlement.

This kind of activity is somewhat common but this Los Angeles case suggests that there was a wide ring of people involved.  They had developed a method of systematically committing fraud against car dealers and insurance companies.  In the end, consumers have to pay for this activity as the cost to pay the bogus claims, as well as the cost to investigate and litigate some of these claims are eventually passed on to the consumer.

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