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Auto insurance fraud is a widespread problem in many parts of the country, and one that can be extremely costly not only to policy providers, but also other drivers who have to share the burden through higher premiums as well. Now, a number of state and local law enforcement agencies are making more concentrated efforts to crack down on this kind of fraud. But in the meantime, insurance agents might need to explain to consumers the potential risks involved with these criminal efforts, and how they can have an effect on their bottom lines.

The state of California, for example, is now trying to stamp out this type of fraud in the Los Angeles area especially, because that is largely considered to be the state's biggest site for such activity, according to a report from the state's Department of Insurance. The two most common types of insurance fraud in the area are planned auto accidents and intentional vandalism, and efforts to reduce instances of these crimes have largely proven successful.

What's the damage?
When individuals alleged to be involved in such fraud were apprehended by authorities, and put on trial, they typically faced sentences of anywhere between two and five years, the report said. Moreover, they also may be made to pay fines of as much as $50,000 per instance of fraud discovered.

""Over the last three years we have been successful in investigating and helping to prosecute all types of insurance crimes and increasing the number of arrests made for individuals who have committed auto insurance fraud,"" said Dave Jones, the state's insurance commissioner. ""In addition to my commitment to ensuring all California consumers are treated fairly by their insurers, my mission also extends to ensuring there is a healthy and vibrant insurance marketplace. When fraud occurs, the balance of the insurance market is upset, which is why we have further increased our efforts to stamp out fraud across the state.""

The overall impact of auto insurance fraud on the broader pool of policyholders can be substantial, especially in states as populous as California, where instances of fraud might be more rampant. For this reason, agents might need to take the time to explain that this issue might be why premiums rise when they do, even when the drivers themselves have done nothing wrong. A greater understanding of these problems might, in turn, lead to a better relationship between agent and client.

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