It seems Geico is taking a more aggressive approach when it comes to tackling potential fraudsters by bypassing the criminal system and using the civil courts to get a more beneficial result.
The Government Employees Insurance Company (Geico), which collects around US$290 million in premiums each year, is owned by Warren Buffett’s Berkshire Hathaway and has met with an abundance of insurance fraud.
At least US$80 billion in fraudulent claims are made annually in the US, the Coalition Against Insurance Fraud estimates, saying this is also a conservative figure because much insurance fraud goes undetected and unreported.
Faked injuries and staged accidents are par for the course in order to get pay-outs from the insurance company and Geico claims that many smaller practices such as chiropractors and physical therapists are involved in the system by billing insurers incorrectly, providing inappropriate treatment and, in some cases, illegally paying others to direct people to their practices after an accident.
According to the Coalition Against Insurance Fraud group’s website,“Staged-crash rings fleece auto insurers out of billions of dollars a year by billing for unneeded treatment of phantom injuries. Usually these are bogus soft-tissue injuries such as sore backs or whiplash, which are difficult to medically identify and dispute.”
But rather than seeking criminal prosecution for those found guilty of such fraudulent claims, Geico has instead been suing the local businesses involved, achieving a usually quicker and more effective result. In fact, Geico hasn’t reported a criminal case since 2013.
With steep legal costs involved and extensive damages for such businesses should they be found guilty, many of the cases between Geico, which is now the US’s second largest insurer, and the concerned party have been settled out of court. In some cases, Geico has won, leaving local practices to pay damages and legal expenses, setting a precedent for small businesses and causing them to refuse Geico customers.
This has led to suggestions that Geico is specifically targeting low-income areas, launching expensive civil cases against businesses in areas such as Dorchester and Lawrence, essentially discouraging potential fraud, but also legitimate claims.
Speaking to the Boston Globe, Jeffrey Coniaris, a Weston lawyer said: “These kinds of general fraud lawsuits can have a significant chilling effect on clinics and could easily be used to get all the clinics in any neighborhood to stop seeing patients with a certain brand of car insurance.”
This is not the first time Geico has been accused of targeting specific demographics. Earlier this year, Geico was ordered to pay US$6 million dollars to settle a complaint by the Consumer Federation of California which claimed that the insurer had been targeting low and moderate income, unmarried women drivers, with deceptive and higher auto insurance costs. As part of this settlement, Geico was required to provide a base cost to good drivers regardless of gender or marital status going forward.
