Blog: Florida Insurance Consumer Advocate to unveil auto insurance fraud findings

Oct 31, 2011

The following article was posted to the House Keys blog in the South Florida Sun Sentinel on October 31, 2011: 

Consumer advocate to unveil auto insurance fraud findings

By Julie Patel

Robin Westcott, the state’s Insurance Consumer Advocate, will release a summary of her findings on personal injury protection insurance fraud at a Florida Cabinet meeting Tuesday.

The findings are based on information she gathered from meetings she held this year with insurance and health care industry officials, attorneys, and others.

The Property Casualty Insurers Association of America, an insurance industry trade group, released its own findings and recommendations on PIP last week. PIP pays medical bills for policyholders injured in auto accidents regardless of who is at fault.

PCI said its recommendations would slow the pace of premium increases for automobile insurance.

The findings:

Insurers’ liability coverage costs aren’t keeping pace with premiums. Premiums for liability coverage – including PIP, bodily injury, property damage liability and uninsured motorists coverage – increased by more than $500 million from 2007 to 2010. Meanwhile, insurers’ costs for claims, expenses to investigate and fight claims, and other operational costs such as salaries and commissions increased by $1 billion.

Fraud costs insurers and their policyholders hundreds of millions of dollars. Most of the “fraud” involved is for what the industry considers inflated medical and litigation costs. The rest, 30 percent, is for staged or phantom accidents.

The group estimates fraud cost consumers about $336 million in 2010. That’s based on comparing the cost of an average PIP claim in 2008, $6,681, with the cost in 2010, $8,137. If it grew at the same pace as regional medical inflation costs, it would have increased 4 percent to $6,955, according to Sarah Bascom, a spokeswoman for the group. The group is assuming the difference is due to fraud.

The group says Insurance Commissioner Kevin McCarty estimates that PIP fraud costs Floridians $800 million annually but they’re checking the figure, as it may have come from Gov. Rick Scott, according to a spokeswoman.

Costs for PIP claims are increasing faster than health care costs, by some measures. No-fault claims costs increased by 38 percent from 2006 to 2011 but U.S. health care costs only increased 18 percent since then. A Sun Sentinel analysis in April showed the average claim paid out for PIP claims increased 22 percent in Florida since 2004, according to information the Insurance Information Institute submitted to legislators, while the cost of medical care increased 26 percent nationwide, to the Bureau of Labor Statistics

Health care providers in Florida charge more for medical services and use specialty practices more than some other no-fault states. And compared to traditional health care providers who treat no-fault patients, specialists such as massage therapists and acupuncturists charge 40 percent, have 75 percent more visits and 83 percent longer treatment lengths.

The recommendations:

Give insurers more time to investigate suspicious claims. Under current law, they have 30 days to pay PIP claims and if they don’t, policyholders and their attorneys must warn the company they plan to sue. After another 30 days, they can file a lawsuit.

Cap fees for policyholders’ attorneys to reduce costs. Some consumer groups say this could create a disadvantage for policyholders and doctors who have claims disputes with insurers.

Allow insurers to visit and inspect medical clinics to verify the services provided.

Beef up a law that limits fees charged by health care providers for various treatments.

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