Staged auto accidents and questionable medical treatment are adding around $1 billion to the costs of Floridas no-fault auto insurance system, the Insurance Information Institute (I.I.I.) says.
The I.I.I. reported that the typical two-car family could be paying what amounts to a fraud tax of nearly $100 based on estimated fraud inherent in the states current no-fault auto insurance system.
Multiplied by Floridas 11,288 million insured vehicles, it means that fraud costs related to no-fault auto insurance could rise to nearly $1 billion by the end of 2011.
An I.I.I. white paper, "No-Fault Auto Insurance In Florida," illustrates how the number and cost of automobile insurance claims is rising, despite a drop in reported car crashes and safer cars.
There are more auto insurance claims and a higher percentage of them seem to require extensive medical treatment, said Lynne McChristian, Floridas I.I.I. representative. This is a costly combination that only offers one reasonable explanation -- fraud and abuse of the no-fault auto insurance system is being paid for by all drivers, and steps must be taken to reverse this course.
I.I.I. estimates that no-fault fraud has cost Florida vehicle owners and their insurers $853 million since 2008. The cumulative costs from 2009 through 2011 could exceed $1.5 billion if current trends continue.
The amount of "pure premium" required to cover the expected costs of Floridas no-fault auto system, also known as Personal Injury Protection (PIP), soared 55.4 percent between 2008 and the third quarter of 2010. Pure premium is defined as the amount required to pay only expected losses. It does not include expenses and other costs of doing business.
In the fourth quarter of 2008, the pure premium to cover expected losses was $99.81; by the third quarter of 2010, the amount of pure premium necessary to pay expected losses had soared to $155.13.
The only logical explanation for such a dramatic increase in the expected costs of a no-fault claim is a surge in fraud and abuse," McChristian said.
The National Insurance Crime Bureau says Florida leads the country in the number of staged accidents, and that staged accidents often lead to treatment for injuries that are nonexistent or greatly exaggerated, enabling unscrupulous medical providers and attorneys to tap into the $10,000 minimum PIP coverage
requirement.
Florida is one of 12 states, along with Puerto Rico, that has a no-fault law. The terms PIP and no-fault are used interchangeably to denote any auto insurance program that allows policyholders to recover a financial loss from their own insurer.
William Stander, of the Property Casualty Insurance Association, said the industry will pursue legislation to close regulatory loopholes and crack down on fraud.
"We're working on a package of reforms. There will be action," Stander said, noting that his organization is in contact with the insurance committee chairmen of both houses -- Sen. Garrett Richter, R-Naples, and Rep. Bryan Nelson, R-Apopka.
Among the prime targets, Stander said, is the loose licensing and oversight of clinics he derisively labels "PIP mills."
Meantime, law enforcement has stepped up investigation of staged scams, which is leading to more arrests and more attention being focused on the criminals who are operating fraud rings, McChristian said.
Florida has a Division of Insurance Fraud within the Florida Department of Financial Services that helps safeguard citizens against acts of insurance fraud.
The DFS offers a reward of up to $25,000 for information leading to the arrest and conviction of people who commit complex, organized insurance crimes.
John Askins, director of the fraud division, reports that his office has added a new PIP squad in Tampa to "combat the increasing problem in that area" and that additional hires are in the works elsewhere.
"There is no shortage of criminals who seek to commit fraud at every opportunity," Askins said.
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Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.
