Policy Documents

Research & Commentary: No-Fault Insurance and Personal Injury Protection Insurance Fraud

Matthew Glans –

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.

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 percent between the second quarter of 2008 and the third quarter of 2010.

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 percent 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.

Organizations such as the Insurance Information Institute and the Sunshine Alliance to Erase Fraud have made several suggestions about how to limit PIP fraud, centering on the creation of a well-funded team of statewide prosecutors to pursue these crimes, with sound regulations and strong penalties to enforce. Clinic licensing laws also should be strengthened to reduce opportunities for fraudulent claims from medical mills.

The following articles examine no-fault insurance and personal injury protection insurance fraud and the problems currently plaguing Florida’s insurance market.

Insurance Information Institute Issue Update: No-Fault Auto Insurance
This Issue Update from the Insurance Information Institute examines no-fault insurance and how it has been implemented in several states. The update also examines the growing problems created by PIP fraud.

The Era of the Paper IMEs: Has Florida’s No-Fault Law Become Unconstitutional?
This paper by Woody R. Clermont, an assistant general counsel and judicial staff attorney with the Office of the General Counsel for the Eleventh Judicial Circuit of Florida, considers whether the current no-fault laws are unnecessary or even unconstitutional.

Florida’s Motor Vehicle No-Fault Law
This report from the Florida Senate’s Committee on Banking and Insurance explains the state’s no-fault law, its history, and its effectiveness. The report finds that although the no-fault law increased the timeliness of claims while avoiding the courts, reforms are needed to address cost problems and PIP fraud.

Florida No-Fault Insurance Reform: A Step in the Right Direction
This paper by Mark K. Delegal and Allison P. Pittman examines Florida’s original no-fault insurance statutes and the logic behind them, and it looks at the current requirements of Florida’s no-fault insurance laws.

Insurance Fraud Uncovered: Fraud Facts
This fact sheet from the Property Casualty Insurers Association of America identifies several of Florida’s automobile personal injury protection fraud problems.

Lawmakers May Change No-Fault Insurance System
This article from the Sarasota Herald Tribune discusses recent efforts by legislators to reform the state’s no-fault system and the debate between business groups and trial attorneys and medical providers, who support the current law.

Florida Is No. 1 in Staged Car Wrecks
This article from the Orlando Sentinel discusses Florida’s growing problem with staged accidents and efforts by legislators to combat insurance fraud.

Reforms Always Stir Up a Storm
A Miami Herald article discusses the debate over PIP reform and states the positions of several groups now lobbying the Florida legislature.

Florida Insurers, Businesses Take Aim at PIP Fraud
This article from the Insurance Journal outlines several recommendations for PIP reform from the Property Casualty Insurers Association of America.

No-Fault Fraud: Cash Register for Crooks?
This article by James Quiggle, director of communications for the Coalition Against Insurance Fraud, examines no-fault fraud in several states and outlines its negative effect on the insurance market as it clogs courts and costs insurers.