In the last 3 years, California has seen a 9% increase in the number of questionable claims according to the National Insurance Crime Bureau (NICB).

Dominated by questionable vehicle thefts and faked/exaggerated injuries, these questionable claims are referred to the NICB by the more than 1,100 member insurance companies and require at least one (and as many as seven) indicators of possible fraud.

“California sees the most, by far, vehicle thefts per year,” said Frank Scafidi, director of public affairs for NICB. “Many of these are what we call ‘owner give-ups;’ thefts reported to police by owners who actually had a role in the vehicle’s disappearance.”

Scafidi added that faked/exaggerated injuries are dominating not only California’s fraud activity, but all of the fraud we see across the country. “A lot of people will seize upon an auto collision as a means to seek illegitimate or excessive payments,” Scafidi said.

The claims in Calif. made up just nearly 50,000 of the 250,350 QCs across the country between 2008 and 2010, though were few in comparison to the 235,000 claims reports that are submitted to ISO daily.

When it came to policy type for California QCs, the most common (54 percent) was personal automobile, with other common policy types being personal property, workers’ compensation and employer’s liability, and commercial automobile.

The most frequently used referral reasons for these QCs were questionable vehicle theft and faked/exaggerated injury followed by fictitious loss, prior loss/damage, and faked damage. Additionally, the most common overall QC loss types were bodily injury, theft, collision, bodily injury relating to automobiles, and vandalism and malicious mischief.

The cities posting the most QCs were Los Angeles, San Francisco, San Diego, Sacramento, and San Jose, comprising nearly 25 percent of QCs from 2008 to 2010. In all three years, Los Angeles far outweighed the other cities with between 1,500 and 2,000 QCs each year. Even in second place San Francisco, between 500 and 650 QCs were reported annually.

Based in Des Plaines, Ill., NICB is a not-for-profit organization dedicated to preventing, detecting, and defeating insurance fraud and vehicle theft through data analytics. In 2010, NICB member companies wrote approximately 80 percent of the nation’s P&C insurance, including 93 percent of the nation’s personal auto insurance.

In June 2010, the Orange County District Attorney’s (OCDA) office rounded up 53 California repair shop owners and other employees in a sweeping anti-fraud sting. Nine months later, the bulk of those cases have been closed, with divergent outcomes for many of those who were busted for adding pre-existing damage to estimates that were destined for insurance companies.

The defendants were arrested as part of Operation Straight Body, a five-month undercover operation conducted by the OCDA’s Automobile Insurance Fraud Unit. Among those arrested were 24 shop owners, including Richard Evans of Huntington Beach Bodyworks, who was featured on the Speed Channel program “Chop Cut Rebuild.”

The OCDA conducted 152 undercover operations in Orange County from January to May 2010, targeting shops that had been identified by the California Bureau of Automotive Repair (BAR) as having consumer complaints filed against them in the last three years. Additional shops included those referred by the National Insurance Crime Bureau (NICB), along with independent auto repair facilities that were not registered with the BAR.

Of the 53 arrested, 36 accepted an offer from the OCDA to have their charges reduced to a misdemeanor in exchange for paying a $1,000 fine and attending a fraud prevention class held by the California BAR and the OCDA’s office. Provided they complied with the terms of the deal, their cases have been dismissed. An additional two cases destined for jury trails were dismissed by the court.

But another dozen or so defendants held out and had their charges dismissed on the merits. Another shop owner took his case to a jury and won.

In the sting operation, an OCDA investigator would bring a vehicle (either a Ford Expedition or Mercedes Benz) to the shop asking for a written estimate to repair damage caused by a recent collision. During the inspection, the undercover investigator would note that the vehicle also had some existing damage (either a missing bumper or a damaged fender, depending on the case), and ask if those repairs could be added to the estimate. They would then ask that the estimate be sent to an out-of-state insurance company called Mendota.

While the bulk of the repairers targeted in the sting declined to provide such an estimate, the OCDA says that those charged had agreed to provide an estimate with the knowledge that it would be used to commit insurance fraud.

The repairers originally faced felony fraud charges that carried a maximum sentence of five years in state prison.

The repairers who declined to accept the OCDA’s deal, though, claimed that these estimates could not have been used fraudulently.

“If you called an insurance company, they would never have paid on just that estimate. They would have sent out their own adjuster, because these had more than $2,500 worth of damage,” says Dyke Huish, a criminal defense attorney who represented several of the exonerated repairers, including Evans.

According to Huish, the estimates did not constitute fraud because there was never any claim made to the insurance company.

“The critical element is that what they did was not really a crime,” Huish says. “Because they just gave estimates. They were not submitting false reports to the insurance company. They were not submitting false claims, they weren’t claiming work that wasn’t done. They were just asked to give an estimate by a guy who showed up and said, ‘you know what, I didn’t have a bumper on it. Can you give me an estimate?’”

Only one case actually made it all the way through a jury trial: that of Mike Rocha, owner of Placentia Auto Body, a small family-owned shop in Placentia, Calif. He, too, was approached by the “owner” of the Ford Expedition.

“I told him, ‘You don’t need an estimate, you need to choose a shop and let the insurance company know,’” Rocha says. When the owner persisted that he just needed two estimates to fax to the insurance company, Rocha told him that “it doesn’t matter if I write an estimate, they won’t honor it. They have an independent writer that comes to the body shop.”

After going back and forth several times, Rocha finally offered to write an estimate that included used parts, noting that the subframe of the vehicle would need replaced. He also told the owner that the vehicle was likely going to be totaled.

“So I wrote an estimate with those parts, and said, ‘Well, here’s the estimate, but this is not going to fly with the insurance company,’” Rocha says.

After his initial arrest and release, Rocha hired an attorney and showed him the original paperwork. “I showed him a copy of the estimate,” Rocha says. “There was no policy number, no insurance number, no claim number. Just a plain estimate.”

At this point, Rocha was offered the same deal as the other defendants: to pay a fine and attend the BAR class in exchange for a dismissal. Because his attorney felt he had a strong enough case, Rocha decided to plead not guilty and move forward to the trial. A jury ultimately found him not guilty.

Vindication in court cost him $5,000 and a lot of time away from his shop. “I think I did the right thing,” Rocha says. “I beat them. My record stays clean.”

“It was devastating for my family and for my kids,” Rocha continues. “I coach youth soccer. I’ve been involved as a volunteer at my church, and for my family to see all this and to see that I was arrested for something that they know I couldn’t do – it was a big blow for them.”

According to Huish, a number of defendants wound up being fired in the aftermath of the operation, including several who had their charges dismissed. “I think in the end the saddest thing is that many [people] lost their jobs over this, only to see their cases dismissed,” Huish says. “That’s really tragic and not what we want our government to be doing. We don’t want the government inventing new ways to turn people into criminals.”

The OCDA’s office maintains that it accomplished exactly what it set out to do.

“The primary goal of the OCDA’s office in pursuing this case was to protect the community and protect consumers, and we feel that it’s been successful based on the results in terms of the completion of these classes by the defendants, and also based on the fact that the BAR has reported a significant drop in consumer complaints involving body shops since Operation Straight Body,” says Farrah Emami, spokesperson for the OCDA’s office.

Lesson learned

While Rocha admits that he should have taken a harder line with the undercover customer, he is upset with the approach that the OCDA took in conducting the sting. “When I was talking to the different people who got arrested, a lot of them rejected the [investigator] that came in for an estimate the first time, and he just kept pounding them for it.

In June 2010, the Orange County District Attorney’s (OCDA) office rounded up 53 California repair shop owners and other employees in a sweeping anti-fraud sting. Nine months later, the bulk of those cases have been closed, with divergent outcomes for many of those who were busted for adding pre-existing damage to estimates that were destined for insurance companies.

The defendants were arrested as part of Operation Straight Body, a five-month undercover operation conducted by the OCDA’s Automobile Insurance Fraud Unit. Among those arrested were 24 shop owners, including Richard Evans of Huntington Beach Bodyworks, who was featured on the Speed Channel program “Chop Cut Rebuild.”

The OCDA conducted 152 undercover operations in Orange County from January to May 2010, targeting shops that had been identified by the California Bureau of Automotive Repair (BAR) as having consumer complaints filed against them in the last three years. Additional shops included those referred by the National Insurance Crime Bureau (NICB), along with independent auto repair facilities that were not registered with the BAR.

Of the 53 arrested, 36 accepted an offer from the OCDA to have their charges reduced to a misdemeanor in exchange for paying a $1,000 fine and attending a fraud prevention class held by the California BAR and the OCDA’s office. Provided they complied with the terms of the deal, their cases have been dismissed. An additional two cases destined for jury trails were dismissed by the court.

But another dozen or so defendants held out and had their charges dismissed on the merits. Another shop owner took his case to a jury and won.

In the sting operation, an OCDA investigator would bring a vehicle (either a Ford Expedition or Mercedes Benz) to the shop asking for a written estimate to repair damage caused by a recent collision. During the inspection, the undercover investigator would note that the vehicle also had some existing damage (either a missing bumper or a damaged fender, depending on the case), and ask if those repairs could be added to the estimate. They would then ask that the estimate be sent to an out-of-state insurance company called Mendota.

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While the bulk of the repairers targeted in the sting declined to provide such an estimate, the OCDA says that those charged had agreed to provide an estimate with the knowledge that it would be used to commit insurance fraud.

The repairers originally faced felony fraud charges that carried a maximum sentence of five years in state prison.

The repairers who declined to accept the OCDA’s deal, though, claimed that these estimates could not have been used fraudulently.

“If you called an insurance company, they would never have paid on just that estimate. They would have sent out their own adjuster, because these had more than $2,500 worth of damage,” says Dyke Huish, a criminal defense attorney who represented several of the exonerated repairers, including Evans.

According to Huish, the estimates did not constitute fraud because there was never any claim made to the insurance company.

“The critical element is that what they did was not really a crime,” Huish says. “Because they just gave estimates. They were not submitting false reports to the insurance company. They were not submitting false claims, they weren’t claiming work that wasn’t done. They were just asked to give an estimate by a guy who showed up and said, ‘you know what, I didn’t have a bumper on it. Can you give me an estimate?’”

Not guilty

Only one case actually made it all the way through a jury trial: that of Mike Rocha, owner of Placentia Auto Body, a small family-owned shop in Placentia, Calif. He, too, was approached by the “owner” of the Ford Expedition.

“I told him, ‘You don’t need an estimate, you need to choose a shop and let the insurance company know,’” Rocha says. When the owner persisted that he just needed two estimates to fax to the insurance company, Rocha told him that “it doesn’t matter if I write an estimate, they won’t honor it. They have an independent writer that comes to the body shop.”

After going back and forth several times, Rocha finally offered to write an estimate that included used parts, noting that the subframe of the vehicle would need replaced. He also told the owner that the vehicle was likely going to be totaled.

“So I wrote an estimate with those parts, and said, ‘Well, here’s the estimate, but this is not going to fly with the insurance company,’” Rocha says.

After his initial arrest and release, Rocha hired an attorney and showed him the original paperwork. “I showed him a copy of the estimate,” Rocha says. “There was no policy number, no insurance number, no claim number. Just a plain estimate.”

At this point, Rocha was offered the same deal as the other defendants: to pay a fine and attend the BAR class in exchange for a dismissal. Because his attorney felt he had a strong enough case, Rocha decided to plead not guilty and move forward to the trial. A jury ultimately found him not guilty.

Vindication in court cost him $5,000 and a lot of time away from his shop. “I think I did the right thing,” Rocha says. “I beat them. My record stays clean.”

“It was devastating for my family and for my kids,” Rocha continues. “I coach youth soccer. I’ve been involved as a volunteer at my church, and for my family to see all this and to see that I was arrested for something that they know I couldn’t do – it was a big blow for them.”

According to Huish, a number of defendants wound up being fired in the aftermath of the operation, including several who had their charges dismissed. “I think in the end the saddest thing is that many [people] lost their jobs over this, only to see their cases dismissed,” Huish says. “That’s really tragic and not what we want our government to be doing. We don’t want the government inventing new ways to turn people into criminals.”

The OCDA’s office maintains that it accomplished exactly what it set out to do.

“The primary goal of the OCDA’s office in pursuing this case was to protect the community and protect consumers, and we feel that it’s been successful based on the results in terms of the completion of these classes by the defendants, and also based on the fact that the BAR has reported a significant drop in consumer complaints involving body shops since Operation Straight Body,” says Farrah Emami, spokesperson for the OCDA’s office.

Lesson learned

While Rocha admits that he should have taken a harder line with the undercover customer, he is upset with the approach that the OCDA took in conducting the sting. “When I was talking to the different people who got arrested, a lot of them rejected the [investigator] that came in for an estimate the first time, and he just kept pounding them for it.

“The economy is not very good, and on top of that for them come in and drain you like this, it just puts you out of business,” Rocha says. “They ruin your reputation, they play with your feelings, your family’s feelings. They step on you. They don’t care.”

If the OCDA had hoped to teach shop owners a lesson, however, Rocha says they certainly succeeded. He’s put up a sign in his shop letting customers know that he will not provide a written estimate without a claim number, will not waive deductibles and that unrelated damage will not be included in any estimate.

“That’s the way I’m protecting myself,” Rocha says. “That’s what I told the jury. As soon as I walk in the door at 8 a.m., I’m a big target. People come in and try to get you to do something wrong. I’m definitely going to be more careful.”

Automobile coverage in CA can become complex depending on a person’s specific needs and is often misunderstood by consumers which may leave them with the wrong type of policy and/or underinsured. California requires that motorists are Financialy Responsibile when registering and operating a vehicle. You must have compensation in place in case you cause injury or property damage to another when operating your auto.

Complying with the state’s Financial Responsibility law is done by:

Making a $35,000 cash deposit with the California DMV;
Obtain a surety bond for $35,000 from an insurer licensed to do business in the state; or
Buying a California auto insurance policy from a licensed carrier.

You policy must have minimum limits of liability in the amount of $15,000 for bodily injury to one person, $30,000 for bodily injury to two or more people and $5,000 for property damage; motorists should be aware that this coverage does not cover any property damage or injuries that are sustained by the insured.

Additional Info About CA Car Insurance
A large number of drivers who choose to purchase auto insurance buy choose the minimal California limits. Unfortunately what many do not realize is that California has some of the lowest requirements in the nation and purchasing these low limits can leave motorists liable for the cost of injuries or damages that exceed what is covered by the policy. For example, if a motorist strikes a high end vehicle and causes damages in the amount of $12,500; if the minimum is carried for property damage then the insurer will only pay $5,000 toward the damage and the policyholder could be held responsible for the remaining $7,500.

Limits of $100,000/$300,000/$50,000 to help avoid facing financial hardships in the event that a third party is seriously injured or substantial property damage is caused by the policyholder. Although these limits may be much higher than what is required and can become expensive for some individuals, it may be wise to buy limits as high as can be afforded. In addition, motorists should be aware that the state requirements will not pay for injuries or damages sustained by the insured and additional coverage must be purchased to cover expenses if this were to occur. The California Department of Insurance Information Guide explains the optional types of coverage such comprehensive and collision which will help pay to repair or replace an insured’s vehicle.

California Insurance Commissioner Steve Poizner announced that on March 5, Jay Xi Chen and his sister, Tracy Chen Chen, both of Diamond Bar, Calif., were arrested at their residence on felony auto insurance fraud charges for filing an allegedly false insurance claim surrounding damage done to a Nissan GT-R supercar. Jay was charged with six counts; Tracy was charged with one.

A four-month investigation revealed that Jay reported to Farmers Insurance Exchange that his sister had been driving the GT-R when it was involved in a collision on Interstate 10 on March 16, 2009. Tracy corroborated this story. Jay later withdrew this claim, stating he would pay for the repairs himself.

On June 2, 2009, Jay reported another claim with the same vehicle, stating that this time he crashed the auto while driving on Highway 60 in Riverside County.

However, ICC Collision Center reported that it had Jay’s unrepaired Nissan GT-R in its shop since March 2009.

Furthermore, a video found on YouTube showed a Nissan GT-R being driven on San Gabriel Mountain Road in the state during what appears to be a street race. The supercar crashed into a wall. Detailed inspection of the video showed the GT-R has the same damage as the one in Jay’s claim. The potential loss of this claim was $76,000.

The criminal charges were filed against the Chens by the San Bernardino County District Attorney’s Office, which is prosecuting the case. Each count could result in a penalty of up to five years in prison and/or $10,000 in fines if convicted.

The arrest resulted from an investigation by the Inland Empire Organized Automobile Fraud Interdiction Team operating out of the California Department of Insurance’s (CDI’s) Inland Empire Regional Office. This team is comprised of CDI and the California Highway Patrol. Farmers also provided assistance during the investigation.

By Troy Anderson

Suspects accused of staging `paper accidents’ to collect money.

An Encino attorney, three chiropractors and a handful of legal aides were arrested Thursday for alleged involvement in a large-scale auto insurance fraud ring involving more than 300 suspects, authorities said Thursday.

Dubbed “Operation Big Fish,” the case is one of the largest in a string of auto insurance fraud rings the District Attorney’s Office has broken up in recent years, Auto Insurance Fraud Division Deputy District Attorney Gregory Alker said.

The defendants, one of whom fainted when he opened the door to investigators Thursday morning, are accused of defrauding 19 insurance companies by filing false claims for staged accidents. The total losses are estimated at $549,000, Alker said.

The ring allegedly carried out what Alker called “paper accidents.”

“They won’t even have a legitimate accident,” he said. “They have somebody who goes and damages the vehicles to look like they were in an accident and they call the insurance company.”

Investigators arrested attorney Vadim Schar, 40, at his Encino home without incident. Schar is charged with 16 counts of insurance fraud and four counts of possession of illegal narcotics, including cocaine, methamphetamine, concentrated cannabis and marijuana, Alker said.

Neither Schar nor his attorney returned calls for comment.

Chiropractors and paralegal administrators at three law firms also were arrested and charged. Among them were chiropractor Arkady Pishik, 52, and paralegal administrator Alex Shidlovitsky, 56.

Pishik is charged with 14 counts of insurance fraud and Shidlovitsky is charged with 22 counts of insurance fraud.

Chiropractors Arutyun Tovanyan, 33, and Dely Diaz, 37, also are charged in the complaint, as are paralegal administrators Geliya Akselrud, 67, and Michael Itkin, 50, who fainted when he opened his door to investigators. The four collectively face 42 counts of insurance fraud.

Hometowns were not provided.

Alker said those involved solicited vehicle owners to participate in the ring, offering to pay them $2,000 to $2,500, but then never paid them. Vehicle owners who complained sometimes faced threats, Alker said.

“The only thing that was pretty scary was someone had their house shot up,” Alker said.

The defendants are part of a larger conspiracy involving more than 300 suspects, Alker said.

Since Operation Big Fish began in April 2007, 63 conspirators have been charged. To date, 27 have pleaded guilty.

Sacramento resident Joseph A. Torrez has been convicted and sentenced on March 4 to 240 days in the Sacramento County Jail, five years probation and ordered to pay more than $26,365 in restitution to State Farm Insurance Co., the California Department of Insurance reported.

According to CDI, on April 22, 2009, Torrez, then a sergeant for the California Department of Corrections, was arrested at his place of employment, Folsom State Prison, and booked into the Sacramento County Jail on insurance fraud charges.

On March 9, 2009, the National Insurance Fraud Crime Bureau contacted the Sacramento County Urban Auto Insurance Fraud Task Force with information regarding the possible location of a stolen motorcycle. State Farm had previously paid approximately $18,654 for a loss claim on the motorcycle. An anonymous caller contacted the insurance company, alerting them that insurance fraud had allegedly been committed.

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The Auto Task Force discovered that Torrez claimed his 2005 custom motorcycle had been stolen from a garage in Sacramento County on August 5, 2008. He claimed that when he arrived at his mother’s home, the yard gate was ajar, and the roll-up door to the garage where he stored his motorcycle was open. Torrez claimed he discovered his motorcycle had been taken from the garage where it was housed. Torrez reported the theft to his insurance company on August 5, 2008.

In March 2009, the anonymous informant led the Auto Task Force to the location of the motorcycle at a home in Galt. The motorcycle was seized.

The Sacramento County Urban Fraud Task Force is comprised of investigators from the California Department of Insurance, the Sacramento County District Attorney’s Office and the California Highway Patrol. The Auto Task Force, which has been in operation since 2001, targets any form of organized auto insurance fraud, including staged theft and vandalism rings, staged auto accident rings and other types of organized insurance fraud. The case was prosecuted by the Sacramento County District Attorney’s Office.

Source: CDI

By Ed Leefeldt

Conspiracy theorists will hate it, but insurers taking a big bath on fraud claims see it as salvation. It’s called “telematics,” and essentially it is a Global Positioning System or GPS on board your car.
What’s wrong with this? Many cars have these navigation devices to help drivers find their way through traffic jams and unfamiliar territory. The most famous example of telematics is General Motors‘ “OnStar” system, which summons help for drivers in the event of an accident. But the new telematics is meant to help not the driver but auto insurers.

Progressive is the most progressive in pushing this new technology. It has approval in three states as “MyRate” insurance, so it can base premiums on driver behavior. Progressive’s on-board wireless device measures how far a vehicle travels, where it goes, how fast and at what time of day. The insurer is looking for drivers who exhibit less risky behavior, such as not driving on the Los Angeles freeways during rush hour.

In return for what amounts to having a back seat driver, policyholders receive reduced premiums. And according to Progressive, there’s also a technology cost of $30.

Will other insurers want in? Probably. There’s also another huge incentive. Auto insurers are increasingly becoming the victims of fraud. Recent California cases include drivers who bought cars they knew were damaged, and then insured them and tried to file a claim, as well as drivers who staged accidents, or simply pretended that accidents happened when they didn’t.

The electronic on-board cop could catch a lot of this, or at least make auto fraudsters think twice. That would be a blessing for New York State where, according to the Daily News, fraud cases have risen 33 percent since 2006, with scams focusing on the boroughs of Brooklyn and the Bronx.

The problem: car owners have to agree to install these telematics. So why would potential criminals do this? We force criminals to wear ankle bracelets, don’t we?

Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and been contributed to the Wall Street Journal and the New York Times. He is also the author of The Woman Who Rode the Wind, a novel about early flight.

-By Lavonne Kuykendall, Dow Jones Newswires

Questionable insurance claims rose 14% last year, with a jump in claims regarding suspected staged automotive accidents and construction fraud, according to an industry group.

The National Insurance Crime Bureau said it received a total of 85,209 questionable claims in 2009, compared with 74,902 in 2008. Questionable claims are ones that insurance companies refer to the bureau for closer review and investigation based on fraud suspicion.

A spokesman for the bureau said that the numbers do not necessarily reflect all the questionable claims an insurer receives.

Questionable property claims related to hail damage more than tripled in 2009 to 772 from the year before, the biggest percentage jump of any category, NICB said.

Questionable claims related to staged accidents rose 43% and claims related to the suspicious disappearance or loss of jewelry rose 29%.

Insurers have acknowledged that some claims are rising.

“We are very, very alert to those types of things,” auto insurer Progressive Corp. (PGR) Chief Executive Glenn Renwick said during a November conference call. “The bad frauds, we catch; the good frauds, of course, we probably don’t catch. But we’re very well aware of it.”

He said the company had seen some spikes in claims for personal injury protection coverage, which could come from a variety of causes, including fraud.

“One that can creep in there is fraud, and that’s something that maybe, maybe you could relate to unemployment, too. But I think that’s a little bit too speculative to get into,” he said.

A Progressive spokesman did not immediately return a phone call asking for comment.

State Farm Mutual Automobile Insurance Co., the largest U.S. homeowner and auto insurer, has also seen a rise in fraudulent claims over the last year or so.

“We can’t say it is all a result of economic challenges,” but the company believes that economic conditions play a role, said State Farm spokesman Dick Leudtke.

The bureau said it has seen “significant increases” in claims related to staged auto accidents where “organized criminals are trying to collect for injuries after deliberately causing an auto accident,” said NICB President and Chief Executive Joe Wehrle. The jump could be attributed to increased awareness of scams by insurance companies, he said.

Wehrle also said the bureau has seen more questionable claims in which roofing companies “take advantage of storms to fake or deliberately cause damage to roofs in an effort to get insurers to pay for a replacement roof that wasn’t damaged in the first place.”

California Drivers Have Saved $62 Billion in 20 Years Under Similar Rules and Have Among Most Competitive Insurance Markets in Nation

WASHINGTON, Dec. 1 /PRNewswire-USNewswire/ — A proposed ballot measure would allow Michigan voters to weigh in on consumer-oriented insurance reforms that have saved California drivers an average of $3 billion per year since being enacted in 1988, said two national consumer groups today. Consumer Watchdog and the Consumer Federation of America (CFA) pointed to a 2008 CFA study that reviewed insurance regulations around the country and determined that the California system, on which the Fair Affordable Insurance Rates (FAIR) proposal is based, has been the most effective law in the nation in creating an auto insurance market that is competitive, has low rates and protects consumers from abusive insurer practices.

The proposed initiative would cut insurance rates by 20 percent and establish an aggressive review process for insurance company rates and pricing practices, prohibiting the kind of price gouging that forces Michigan drivers to pay about 12 percent more than the national average for auto insurance, according to the 2008 study. The proposal would also require insurers to base rates primarily on a motorist’s driving record rather than factors like their ZIP code or marital status, which currently dominate the pricing structure of many insurers.

“Michigan law requires motorists to purchase auto insurance; it should also require insurance companies to sell policies at fair and reasonable prices,” said J. Robert Hunter, Director of Insurance at CFA. Hunter is a former Texas Insurance Commissioner and Federal Insurance Administrator under Presidents Ford and Carter. “Our research proves that California’s system is the finest in the nation at protecting consumers, leading to a price drop in auto insurance relative to the national average, from 36 percent above the national average when the law was adopted to a mere 2 percent higher today. Michigan consumers deserve a system that works to protect them rather than the insurance companies,” Hunter said.

“Before an insurance company sells a homeowners’, auto, business or just about any policy in California, the insurer has to be able to prove in a public hearing that its rates are actuarially justified and not excessive. This has made the California market extremely competitive and has kept rates from growing for two decades while premiums skyrocketed everywhere else,” said Douglas Heller, Executive Director of Consumer Watchdog, a national consumer advocacy organization with offices in California and Washington D.C.

Among the findings of CFA’s 2008 study, State Automobile Insurance Regulation: A National Quality Assessment and In-Depth Review of California’s Uniquely Effective Regulatory System, auto insurance prices have increased by 69 percent in Michigan since 1988, the year in which California enacted Proposition 103, its version of the proposed FAIR initiative. California has seen rates increase by only 12.9 percent. Also, Michigan’s auto insurance market is ranked in the middle of the states (21st place) for competitiveness, while California is the fourth most competitive in the country.

The CFA study is available at: http://www.consumerfed.org/elements/www.consumerfed.org/file/finance/state_auto_insurance_report.pdf

GEICO Car Donation Helps Law Enforcement Catch Theft in the Act

OAKLAND COUNTY, Mich.–(BUSINESS WIRE)–Catching car thieves sometimes takes more than just patience and persistence – it takes bait. For the Oakland County Sheriff’s Office Auto Theft Task Force in Oakland County, Mich., that bait is a specially-altered vehicle, donated by GEICO, and strategically placed in high-theft areas around the county to catch auto thieves.

The bait car program, which was started in the county earlier this year after the sheriff’s office noticed an uptick in auto theft throughout the area, allows officers to proactively catch car thieves in the act of stealing the bait car, effectively preventing future residential vehicle thefts.

“Most people who steal these types of vehicles are part of a theft ring that may be involved in other illegal activity like drugs or car jackings,” said Sheriff Michael Bouchard. “By using the bait car we are able to get these people off the street and push down the frequency of auto theft. Once we get auto theft in an area down, it helps reduce other crimes and helps push insurance rates down.”

GEICO constantly works with local law enforcement and community groups to help reduce auto theft in communities around the nation. In addition to working with Oakland County Sheriff’s Office through the bait car program, GEICO is also working closely with the department’s Auto Theft Task Force to shut down fraudulent insurance card rings that contribute to the county’s theft and crime issues.

“Auto theft not only deprives customers of their vehicles, but also puts people in more danger since people who take stolen cars are often involved in accidents or other crimes,” said Steven Rutzebeck, GEICO’s Special Investigations Unit manager. “Bait car donations give us the opportunity to reduce theft, sometimes lowering insurance rates, and increase public safety in these areas.”

For more information on how GEICO is working to combat auto insurance theft and fraud, visit GEICO’s Special Investigations Unit site on www.geico.com.

About GEICO

GEICO (Government Employees Insurance Company) is the third-largest private passenger auto insurer in the United States based on 2008 market share data as reported by the National Association of Insurance Commissioners, March 2009. GEICO provides auto insurance coverage for 9 million policyholders and insures more than 15 million vehicles.