Up to 15 percent of all bodily injury liability payments in California stem from fraudulent auto injury claims, according to a study by the Insurance Research Council.
In 2002, between $319 million and $432 million in bodily injury liability payments in the state were attributable to claims fraud and buildup, the study said.
Elizabeth Sprinkel, IRC senior vice president, said higher insurance premiums are the end result of all this activity.
"Auto insurance buildup may seem harmless when it is thought of as just a few extra dollars tacked on to individual claims," she said. "The reality is claim padding collectively adds up to significant amounts of money."
The appearance of fraud, or misrepresentation of key facts of claims, was found in almost one in 10 paid California BI claims (9 percent), IRC said.
It found the appearance of buildup was more common and was found in more than one in five paid California BI claims (22 percent). As used in the study, "buildup" refers to inflation of otherwise legitimate auto injury claims, which can occur through exaggeration of injuries, the application of excessive medical treatment, or the intentional inflation of lost wages.
While this report shows that claim abuse in California is a significant financial problem, the percentage of claim fraud there was comparable to the national average, according to IRC national data.
Los Angeles demonstrated even higher percentages of bodily injury claim fraud and buildup, with 12 percent containing the appearance of fraud, compared with 8 percent in the rest of the state. Also, 29 percent contained the appearance of buildup, compared with 19 percent in the rest of the state.
The percentage of buildup in Los Angeles was seven percentage points higher than the percentage found among all metropolitan areas countrywide.
The Malvern, Penn.-based IRC is a division of the American Institute for CPCU and the Insurance Institute of America.
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