Growing problem: Suspicious insurance claims for hail damage to cars

John Egan

The number of shady insurance claims for hail damage to cars keeps climbing, according to the National Insurance Crime Bureau.

During the first half of this year, 866 questionable car insurance claims for hail damage were referred to the nonprofit crime bureau, which investigates potential insurance fraud. That's up 64 percent from the first half of 2011, when 527 claims were sent to the bureau.

By comparison, 252 suspicious claims for hail damage to cars were forwarded to the crime bureau in the first half of 2010. From the first half of 2010 to the first half of 2011, the number of these claims soared 109 percent.

And during a two-year span -- from the first half of 2010 to the first half of 2012 -- the number of questionable hail claims for cars skyrocketed 244 percent, according to the crime bureau.

What's behind the increase?

Frank Scafidi, a spokesman for the crime bureau, says it's hard to pin down a reason for the hike in questionable hail claims.

"It is very hard to offer any interpretation of these numbers since they are totally driven by the amount of scrutiny that each receives by the various claims handlers," Scafidi says. "What one claims person thinks is suspicious might not be to another person, so there is that element to consider."

He adds that if a higher number of hailstorms happened during the first half of one year compared with the same period a year earlier, insurers might see a spike in suspicious claims.

Fraud causes costlier premiums

Why should law-abiding consumers care about possibly fraudulent claims? The answer is simple: money. Fraud involving all types of insurance (except health) costs more than $40 billion a year, according to the FBI, with the average U.S. family paying an extra $400 and $700 a year through higher premiums.

"Auto policyholders -- any insurance policyholders, frankly -- should be concerned with the amount of fraud that is being perpetrated against the insurance companies," Scafidi says. "If we can help keep the fraud down, we can help keep premiums down as well."

Hail coverage and losses

The liability portion of a car insurance policy doesn't cover hail damage; 49 states require liability insurance for drivers. For hail damage to be covered, you must carry comprehensive coverage, which insures against theft or damage not caused by a crash.

In 2011, the average claim payout for hail damage to a car was $3,256, according to the nonprofit Highway Loss Data Institute. Last year, State Farm, the country's largest insurer of cars, racked up $900 million in losses blamed on hail damage to cars, spokeswoman Holly Anderson says.

Amy Bach, executive director of consumer advocacy group United Policyholders, notes that disputes can arise between a car insurer and a policyholder over whether reported hail damage already existed  and whether "the whole car has to be painted or just the damaged portion."

Here are some tips for dealing with hail damage to your car:

· Review your insurance policy to see what’s covered and what’s not covered.

· Make a list of what was damaged, and document the damage with photos and video.

· Notify your insurance agent or insurance company.

· Hang on to all bills and receipts related to recovering from the hail damage. Your insurer may reimburse you for those expenses.

· Keep in mind that your insurance deductible (such as $250, $500 or $1,000) will be subtracted from any claim payment you receive to pay for damage to your car.

· Maintain detailed records of every interaction you have with your insurance company regarding your hail claim. Take note of who you spoke to and what was said.

Where the storms are

According to the Insurance Information Institute, here are the top 10 states for hailstorms in 2011:

Rank

State

Number of storms

1

Texas

741

2

Kansas

720

3

Missouri

603

4

Nebraska

575

5

Oklahoma

524

6

Arkansas

374

7

South Dakota

361

8

North Carolina

347

9

Ohio

322

10

Illinois

304

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