Scammers cash in on car "accidents"

In this tough economy, one type of insurance fraud is more popular than ever. It involves scam artists who stage car crashes in order to cash in. CBS News chief investigative correspondent Armen Keteyian shows us how it works.

In Tampa, Florida, security cameras outside a business captured an accident: an SUV "slammed" into a car.

But rewind the tape and you see the car was actually driven into the middle of the street. The driver got out, a collision, and then five people climbed into the damaged vehicle.

The passengers later claimed they were injured, to rip off their car insurance company. Instead, they were arrested and convicted of "staging" a car accident.

Watch the segment from CBS Evening News below:

Ron Poindexter is the Florida director for the National Insurance Crime Bureau, a not-for-profit agency funded by the insurance industry to investigate fraud.

"It's a big problem nationally," he said. "In Florida it's a huge, growing problem that's out of control."

Today 12 states have what's known as no-fault auto insurance. That means no matter who's at fault, everyone involved in a car accident is entitled to insurance money if they're hurt. In Florida, it's up to $10,000 per person; in New York, it's $50,000 -- payouts so big, it's set the stage for massive fraud and scammers like this man, who asked we conceal his identity.

"First of all you gotta recruit people," said the former scammer. "You have to look around for people who wanna do car accidents. And then you have to ask them if they wanna be the hitter or the one [who's] hit [by the] car in front."

"The hitter or the one that's getting hit," asked Keteyian.

"Yeah," he said.

Here's how it works: It's run by organizers who own bogus medical clinics. They in turn hire recruiters who find people willing to stage accidents for money.

The people involved are then taken to the bogus clinics. An undercover video, shot by Florida State investigators, shows what typically happens next. Here, an investigator posing as an accident "victim" was told to sign one insurance form after another for medical treatment he'll never receive. He was then paid $700 in cash for faking the accident and an injury.

"It's easy money like that. And it's a lot of money," said the former scammer.

"Is it always the same thing, is it a back problem?" asked Keteyian.

"That's why it's so easy. No matter what you do, you're gonna have a back problem."

This man told us he made about $1,000 for each person he recruited. Investigators say crooked clinic owners can rake in as much as $2 million a year in phony billings. Unethical doctors, lawyers and even massage therapists are involved and all get a cut.

"What's changed with this kind of no-fault fraud?" Keteyian asked Poindexter.

"The recession and economy have created sort of a cottage industry to a point where they're actually stealing thousands and tens of thousands of dollars and they're not treating or seeing any patients."

One big reason the industry says no fault fraud like this scam added an estimated $650 million to the cost of auto insurance in Florida alone last year.