Research Org. Quantifies Florida’s No-Fault Insurance Problem

As members of the state government continue hearings on the topic of possible reforms for the Florida auto insurance system, a research group has published new findings showing that significant portions of the no-fault claims paid in the state are either inflated or flat-out fraudulent.

In the new report, the Insurance Research Council (IRC) indicates that Florida continues to be a “hotbed” for fraud.

The IRC analyzed 1,359 claims paid in 2007 under personal injury protection (PIP) coverage and found that as many as 10 percent showed signs of fraud while about 1 in 3 involved “either over-billing or excessive utilization of medical services.”

“Although these findings describe conditions of more than three years ago, indications are that the situation has continued to deteriorate,” said the IRC’s senior vice president, Elizabeth Sprinkel.

Florida Insurance Fraud Graph

Click graph to enlarge

According to the report, the size of average PIP loss per insured vehicle rose by 55 percent between 2008 and 2010.

The issue of abuse in the Florida insurance system is nothing new and is part of the reason that coverage prices there remain some of the highest in the nation.

Fraud was identified as a cause for concern in the late 1990s, and the cost of PIP in the state rose dramatically in the following years. Between 2000 and 2003, state regulators reported a total PIP premium increase of a whopping 71 percent, according to a government report.

This led legislatures to pass reforms in 2003, which led to short-term gains that eventually deteriorated.

According to Robert Hartwig, the president of the Insurance Information Institute, Florida currently has the fourth highest average no-fault claim amount in the country, at $8,096.

One issue currently under discussion for possible reforms is enacting a fee schedule for no-fault claims that is similar to the schedules already in place for worker’s compensation. By doing so, it would be harder for medical providers to inflate health care costs following an accident.

Whether meaningful PIP reforms are truly unattainable is unclear so far. Legislators have been pushing for years for further reforms.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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