MOSCOW - It was raining, and the roads were slick. A sedan made an illegal left turn and rammed the front end of another car.
It seems like a typical accident that could have happened anywhere in Russia. Injured passengers are treated by a Russian doctor, the paperwork of the case is handled by a Russian lawyer. The broker who sold the insurance that will pay for car damage and medical treatment is also Russian.
However this accident took place not in Moscow or St. Petersburg, but in the Russian community in Brighton Beach, New York. And although the accident was genuine, the passengers of the Russian-owned car were participating in an insurance scam that has already cost U.S. insurers hundreds of millions of dollars in false claims.
With the introduction of obligatory third-party car insurance in Russia on Jan. 1, insurers here are bracing for an avalanche of similar fraud on a scale that may dwarf anything seen in the United States.
The new law requires all drivers to hold liability insurance for any damages they may cause to others on the road, as motorists in the West have been required to do for decades.
In the United States, insurers became open to abuse when a "no-fault" clause was added to insurance legislation two years ago. The clause gave uninsured participants in a car accident, such as passengers, the right to seek medical treatment at the car insurer's expense.
Damages that Russian insurance companies are required to pay are small compared to what their U.S. counterparts have to pay out.
The maximum payout in Russia per year is $5,520 for car repairs and $8,275 for medical treatment. In the United States, claims can easily go into the tens of thousands of dollars.
"Even $500 is enough in this country" to tempt people to break the law, said the claims officer of a large insurance company, who wished to remain anonymous.
Like others in the industry, he expects domestic drivers to commit fraud for a lot less money than their relatives in Brooklyn.
Scamming insurers has become so rampant among Russians in the New York area that U.S. police have dubbed their investigation Operation BORIS, for Big Organized Russian Insurance Scam.
The formula for car-insurance scams is simple and easily reproducible here.
The owner of a private medical clinic in Brighton Beach hires runners to scout out accidents on the roads. The runners approach uninjured Russian passengers and convince them to claim they have received costly medical treatment at the clinic.
Depending on the amount of treatment they are documented to have received, crash "victims" can get up to $5,000 in cash for signing their name on a medical bill.
The scout is paid a set amount per "victim" collected, with the rest of the booty going to the owner of the medical clinic, courtesy of insurers.
In the car accident described, which happened a few months ago, the passengers approached a medical clinic of ill-repute on their own initiative. The method is widely known among ordinary Russians living in New York.
In Russia, insurers are aware of Operation BORIS and say the situation could become even worse here.
"In 2004, we expect 20 percent of all claims [for car repairs] to be fake," said Alexander Vaskov, who heads the Russian Union of Auto Insurers' anti-fraud department. That translates into $1.5 billion dollars in losses.
Medical treatment, which the new third-party insurance also covers, will potentially be even more damaging to Russian companies. But because doctor's bills haven't started coming in yet, the union has not made an estimate of the possible extent of fraud.
In an ingrained culture of bribe-taking, Russian insurers fear that it's no stretch of the imagination to see police officers participating in insurance scams - a dimension to the problem not evident in Operation BORIS.
The potential for insurance fraud in Russia could thus be greater than in the United States. Besides dishonest passengers and crooked doctors, the police and even employees of insurance companies could be on the take, Vaskov said.
"A typical ring would include the participants of a car accident; a police officer who will write up a fake crash report; and an insurance broker who can provide coverage after the fact.
"With the health system in a state of impoverishment, it's not hard to imagine doctors participating by charging for unnecessary medical treatment," Vaskov said.
There is no easy way for insurers to prevent this type of crime.
"The problem is that insurance fraud is very hard to spot. Insurers only find out they've been tricked long after the scam has happened," Vaskov said.
The only way insurance companies can deal with the problem is by staffing large claims review departments and looking for cases where the same cars or people have been involved in more than the average number of accidents per year.
"Essentially you have to go over every single case," he said. "Big companies in Moscow might be able to handle this, but in the regions, insurance companies lack the resources."
The auto insurers' union is currently setting up a unified database that will store case histories, but the system will only be up and running in six months.