Florida auto insurance fraud bills fail to reach governor's desk

Marcus Pickett

Florida has a fraud problem -- and state regulations that make it difficult for insurance companies to fight back. However, two recent bills aimed at preventing auto insurance fraud died in the Florida Senate during the 2011 session. While the bills aimed to make things easier for insurance companies, opponents argued they would have simply made things too difficult for consumers.

Florida's fraud problem

Auto insurance fraud is fueled partly by Florida's no-fault insurance laws, which allow injured parties to file claims with their own insurers regardless of fault and ensure that claims are paid quickly. Crooks take advantage of the system by staging accidents to get insurance payouts, according to the National Insurance Crime Bureau (NICB). Then, fake medical clinics file inflated claims (some for treatments never performed) with the insurance company of the "victim."

According to the Florida Office of Insurance Regulation (OIR), the number of personal injury protection claims in Florida has increased 28 percent since 2006, even without an increase of licensed drivers. Moreover, the frequency of medical and therapeutic procedures has increased 22 percent. In other words, Floridians seem to be filing a disproportionate number claims and getting extra medical procedures.

NICB also has Florida auto insurance fraud on its radar. According to its numbers, suspicious accident claims in the state increased by 119 percent between 2008 and 2010. The fact that these suspicious claims seem to have accelerated during and after 2008 may indicate that the recession is motivating fraud.

The bills

The two stalled bills would have made it easier for insurers to deny claims and investigate possibly fraudulent ones. But opponents argued that this would have come at the cost of consumers' rights.

SB 1930 would have:

  • Required more detailed crash reports.
  • Given insurance companies more time to investigate suspicious claims before paying them.
  • Required the insured to undergo a physical examination under oath before receiving personal injury protection claim payouts.
  • Allowed insurance companies to give premium discounts to insured drivers who selected preapproved doctors from insurers' networks.

This measure would have targeted fraud by requiring more documentation of the accident and allowing insurers to vet doctors. Police officers at an accident scene could discover evidence of a staged crash -- and crooked clinics likely would not pass insurance company muster. However, opponents worried that such steps would have forced legitimate claimants to wait longer for reimbursement and made it harder for health care providers to deliver efficient treatment.

A second bill, SB 1694, took aim at attorneys' fees. It would have capped the maximum dollar amount attorneys could gain from personal injury protection lawsuits, thus cutting down on legal action and the resulting costs to insurance companies. Opponents argued that the bill would have made it more difficult for injured people with legitimate claims to pursue legal action.

Auto insurance fraud already hurting consumers

More than just the profit margins of auto insurers are at stake. Auto insurance fraud also costs consumers in the form of higher premiums as insurance companies attempt to make up for losses. Personal injury protection premiums have been on the rise since the fourth quarter of 2008, mirroring the rise in claims, according to OIR. If they continue to rise at that same rate, OIR predicts a 29 percent increase in auto insurance premiums over the next year.

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