Auto insurance fraud is a serious problem in Florida. Con-men, unscrupulous doctors, swindlers, and ambulance-chasers have taken advantage of poor regulations under the state’s no-fault insurance laws to inflate personal injury protection (PIP) claims, stage accidents and defraud insurers, resulting in increased costs for insurers and higher rates for policyholders.
In a recent editorial from the St. Petersburg Times, the editors argue that fraud has become a serious problem in Florida, and that legislators should become more involved in ending this “fraud tax.”
Crime pays, but increasingly it’s Tampa Bay’s law-abiding drivers who are footing the bill. Enterprising criminals are taking Florida’s no-fault auto insurance law for a ride, fueling soaring insurance rates for everyone else. Now the only question is whether state lawmakers — consumed with casino gambling and redistricting plans — will give this pocketbook issue the attention it deserves during next year’s legislative session. Any solution should seek to reduce fraud and preserve no-fault insurance to protect victims of car accidents, not repeal no-fault as some have proposed.
The statistics are striking. The number of Florida drivers has been fairly stable since 2004. The frequency of car crashes has actually decreased since 2005. And safety efforts — from better seat belt compliance to improved air bags — should have curbed medical costs from auto crashes. Yet benefits paid by insurers under the state’s no-fault law, called PIP for personal injury protection, have jumped 70 percent since 2008.
No-fault laws are intended to lower the cost of auto insurance by keeping claims out of the courts, and in many cases they achieve this goal. In most states, including Florida, no-fault laws require insurers to cover the injury costs of their own policyholders (first-party coverage) regardless of who is at fault.
Under Florida’s law, insurers pay up to $10,000 in medical claims for a person injured in an accident, regardless of fault. This makes successfully staging an accident attractive to scammers, and it has led to a significant increase in average no-fault claim costs. According to the Insurance Information Institute, average PIP claim costs were $8,096 per claim in the third quarter of 2010, and the number of no-fault claims surged by 46.2% between the second quarter of 2008 and the third quarter of 2010.
The Times editorial found that much of the auto fraud instate stems from problems with how no-fault laws are applied.
Auto insurance fraud was initially a problem largely confined to South Florida. Under the no-fault law, economic damages from an accident up to $10,000 are covered by each driver’s own insurance. So criminals would stage an accident and, with the complicity of a medical clinic, bill their own insurer for up to $10,000 for procedures they never obtained. Other fraud, investigators say, occurs when unscrupulous lawyers or medical clinics exaggerate injuries for victims from legitimate crashes to bilk the insurers.
According to the National Insurance Crime Bureau, Florida now leads the nation in insurance claims for apparently staged accidents, with questionable claims rising by 77% from the first half of 2009 to the first half of 2010. In addition, in Florida and several other no-fault states, criminal groups have set up rings of corrupt clinics and crooked physicians, chiropractors, and lawyers (“medical mills”) filing fraudulent claims paid under PIP law.
While no fault laws can create many problems with fraud, total elimination would be mistake. No-fault laws were intended to lower the cost of auto insurance by keeping claims out of the courts, and in many cases, they achieve this goal. The authors of the editorial agree:
All this has prompted some in the insurance industry to argue that Florida should join the majority of states that make the negligent driver responsible for economic and noneconomic damages from accidents. But no-fault insurance evolved for a reason that remains valid. It ensures that victims of accidents can get immediate medical attention and that medical providers aren’t left uncompensated as legal battles drag on over who’s at fault in an accident.
Florida shouldn’t abandon personal injury protection — as some in the insurance industry want to do — but it should look into some common-sense regulations that set standard prices and disallow quack treatments.