Car insurance fraud involves far more than an accident, mistake or negligence when using a vehicle. It incorporates a thought-out plan and approach to trying to knowingly deceive another party into paying costs for a perceived accident and related damage. Because fraud is such a large category of wrongdoing, the penalties for car insurance fraud can range from civil penalties to criminal investigations and convictions. Due to the fact that car insurance fraud usually involves hundreds to thousands of dollars it is also frequently treated as a felony in California. The problem affects all types of coverage providers, from cheap car insurance to premium coverage providers.

In terms of frequency, California state’s statistics from the Insurance Information Institute. Their research estimates that car insurance fraud can affect up to 10 percent of losses that the insurance industry may realize in the state.This in turn equates to approximately $30 billion every year.

Many experts in the field attribute a recent rise in car insurance fraud in the last few years to the bad economy. As people in general find themselves in tougher financial straits, some have fallen into fraud activity to make an extra dollar quickly. Most of these situations involve what is termed “opportunistic” fraud, where a valid damage claim may already exist but the cost is inflated to get more financial return.

In California, traditional car insurance fraud is commonly seen in a number of practices that are so prevalent, they permanently sit on a red flag list for regulators and investigators. These 5 tips include:

Additionally, an extension of car fraud in California involves a practice dubbed “capping.” This involves a car mechanic or repair shop given damaged car owners referrals to specific health providers or attorneys. The state has labeled this practice a state felony if a fee is charged for the referral.

Uncontrolled vehicle insurance fraud in California hurts everyone who deals with, relies on, or uses vehicle insurance. It doesn’t matter if everyone in state bought cheap car insurance, the cost would still go up as fraud occurs. Even cheap car insurance providers have to recover losses. As a result, when fraud goes up, the cost to everyone goes up. It’s a multiple victim problem, and the economy in California is not making the matter any easier to deal with in 2012.