No fault insurance was initially required in the hopes that it would reduce the number of small claims lawsuits resulting from car accidents. But that’s not what happened. Instead, residents of the 12 states that have no fault insurance legislation are facing rising insurance costs because of fraud, increased medical costs, higher insurance claims, and multiple lawsuits. Florida is one such state.
Ron Poindexter, a National Insurance Crime Bureau director in Florida, says. “Where there’s money, there’s theft. Where there are millions of dollars, there’s organized crime.”
Crooks in Florida work with dishonest medical professionals to operate sham clinics and file thousands of phony or inflated claims. Loopholes in Florida regulations make it easy to open clinics, Poindexter says.
“Some of these places are no more than voodoo medicine shops,” he says. He characterizes them as “billing factories” and says, “There’s no medical treatment going on.”
Under Florida law, insurers must pay within 30 days after a claim is filed. Otherwise, accident “victims” or healthcare providers can sue.
Last year, insurers referred 2,779 suspected staged accident claims in Florida to the National Insurance Crime Bureau, a 119 percent increase from 2008.
Car insurance fraud costs Florida’s no-fault auto insurance system around $1 billion a year, and a typical two-car family pays almost $100 a year in what amounts to a “fraud tax,” according to the Insurance Information Institute. [Source]
Florida isn’t the only state struggling with this issue. At least 33% of insurance claims in New York are suspected of fraud, either through inflated claims or staged accidents. Residents of Detroit, Michigan pay an average of $5,948 for yearly insurance, causing many residents to go without.
As a result, many states are pushing for insurance reform which would limit the amount of a claim, adopting fee schedules, cheaper policy options, and requiring proof of medical treatment. Other legislators are questioning whether no fault insurance should exist in any state.