Insurer Trade Group Urges Florida to Curb Auto Insurance ‘Fraud Tax’

Florida should allow more time for looking into suspicious claims, place a cap on attorneys’ fees and more closely regulate medical clinics to help reduce rampant fraud in the state’s personal injury protection (PIP) auto insurance system, an insurer trade group says.

The Property Casualty Insurers Association of America (PCI) has released a report detailing what it sees as the problems with the current PIP provision in its no-fault auto insurance law and offering several legislative proposals.

“The bottom line is that if PIP is not transformed this year, Florida will continue to lead the country in questionable automobile claims, inviting even more criminal activity and putting Florida’s consumers and businesses at risk,” said Paul Blume, PCI’s senior vice president in charge of state government relations.

Based on Florida Office on Insurance Regulation data, Florida drivers pay the highest amount for auto liability in the country at an annual cost of $736 as opposed to $471. The state’s claim frequency has also risen by 19.2 percent since 2006 as opposed to the one percent increase in states that have a pure tort system.

Likewise, Florida’s average PIP claim cost is outpacing the increase in health care costs by 31.1 percent as opposed to 6.4 percent. The number of PIP related lawsuits has also increased from some 6,000 cases in 2006 to over 28,000 last year.

Blume said action by lawmakers is needed to change the situation.

“Unless something is done to contain the ever-increasing no fault losses and expenses, the ‘fraud tax’ will grow even larger and consumers and businesses will continue to get stuck with the tab,” he said.

PCI is making four specific legislative proposals, including allowing more time to investigate suspicious claims and placing caps on claimant attorney fees. The association also recommends that there should be more oversight of medical clinics by allowing on-site inspections to ensure they are performing the services they bill for and reduce utilization by establishing reasonable treatment limits.

“By passing legislation in the upcoming 2012 legislative session that includes these four vital components, the legislature will help close loopholes that prevent regulators and the marketplace for investigating and fighting fraud,” said Blume.

Florida has been struggling with the state’s no-fault law for several years. In 2007, lawmakers briefly let the bill repeal only to find themselves reinstating it due to pressure from trial lawyers and medical providers. A similar attempt to reform the system this year also failed to gain the necessary legislative support to move forward.

Next year, however, the battle is expected to continue. Republican Gov. Rick Scott has put the issue at the top of his legislative agenda with the goal of making the coverage optional. In addition to insurers, business groups including the Florida Chamber are also pushing for reform.

Next Tuesday, the state’s Insurance Consumer Advocate Robin Westcott is expected to present the results of a working group on the issue.

Florida drivers must carry at least $10,000 in PIP insurance. Under the state’s no-fault law, insurers are required to pay 80 percent of PIP claims, regardless of which driver is at fault. The law was designed to ensure drivers have some coverage and eliminate the need for litigation on smaller claims. However, PCI, law enforcement officials, and public officials say that staged crashes have become endemic around the state turning PIP coverage into an ATM for cheaters.

Typically, a fraud ring will stage an accident and then have fake passengers who are directed to crooked medical providers who order unnecessary medical tests until the $10,000 in coverage is exhausted. Officials say these practices have been expanded to exploit real crashes as recruiters contact crash victims and take advantage of their unfamiliarity with the law to steer them to unscrupulous attorneys and medical providers.

The National Insurance Crime Bureau has found that Florida is leading the nation in staged accidents leading to questionable claims. And four of the 10 U.S. cities with the highest rates of questionable claims are in Florida. Those cities are Tampa, Miami, Orlando, and Hialeah.