OAI: Rate-Evasion Arrests Highlight High Prices for Auto Insurance in Northeast

An announcement last week from the Pennsylvania attorney general of 12 arrests made in relation to an alleged auto insurance rate-evasion scheme is highlighting the prohibitively high prices for coverage in the Northeast, according to OnlineAutoInsurance.com.

A release put out by the attorney general's office said the Pennsylvania crime ring allegedly helped thousands of drivers who were residents of other states get Pennsylvania registrations and fictitious addresses to use to buy bare-bones Pennsylvania policies.

Running an auto insurance quotes comparison for a policy in multiple states can show why someone would want to commit such a crime. Coverage prices vary widely from one state to the next, and the disparity is rather large in the Northeast.

According to estimates from the National Association of Insurance Commissioners (NAIC), the average car insurance expenditure in 2009 was about $811 in Pennsylania. That's compared with an average of $928 in Maryland, $1,021 in Delaware, $1,057 in New York, and $1,101 in New Jersey. 

A lot of that has to do with claims rates in those states, but another contributing factor is that the required coverages in Pennsylvania are significantly lower than those in place in the surrounding area.

Just based on those NAIC numbers, a New Jersey driver who used such illegal rate-evasion services could have cut premiums by an average of about 25 percent.

But those savings come with great costs. 

Knowingly registering a vehicle under a false address is likely to bring some pretty serious penalties. And if those drivers were to get into an accident, chances are their insurer wouldn't end up paying for the claim. That's because lying about your address to get a better rate constitutes "material representation," and, generally, insurers can cancel a policyholder's coverage and deny a claim if he or she is found to have misrepresented personal information when buying a policy. 

Denying a claim for material misrepresentation isn't limited to cases where drivers say they live in a different state. It could happen even if you say that you live in another city, since prices also fluctuate at that level as well. 

According to a press release from the Pennsylvania attorney general's office, the suspects are said to have earned more than half a million dollars and cost the insurance industry millions more.

Source: http://www.attorneygeneral.gov/press.aspx?id=6467

To learn more about this and other insurance issues, readers can head to http://www.onlineautoinsurance.com/ for access to informative resource pages and an easy-to-use quote-comparison generator.