Florida's latest attempt at auto insurance reform falls flat
Auto insurance fraud is a growing problem in Florida, but an anti-fraud bill introduced by state Rep. Jim Boyd, R-Bradenton, died in the spring of 2011. The bill proposed unprecedented crackdowns on fraud through measures like harsher penalties and more detailed crash reports. Yet it raised concerns over the unintended negative effects on policyholders.
Florida's fraud problem
Florida is a no-fault insurance state, which some experts blame for the state's high number of fraud cases. Instead of the at-fault party's insurance covering all medical bills after an accident, each party files a claim with his or her own insurer. No-fault laws are designed to speed up claims and reduce frivolous lawsuits and often require medical bills to be paid within a certain time frame, according to the Coalition Against Insurance fraud.
Most fraud cases involve staged car accidents and bogus injury claims. Fraud rings stage crashes and then get "treatment" at clinics, which also are run by fraud rings. The fake clinic then files fraudulent, inflated claims with insurance companies.
In Florida, staged accidents rose 52 percent in 2009 alone, while bodily injury claims rose 73 percent. This has created extra costs for auto insurance companies -- which get passed on to customers in the form of higher premiums. The Insurance Information Institute estimates that Florida drivers pay almost $50 extra per vehicle per year to cover insurers' losses.
Florida's failed fraud bill
Boyd's fraud bill, H.B. 1411, targeted staged accidents (which soared to more than 3,000 between 2007 and 2009, according to the National Insurance Crime Bureau) through measures like:
- Detailed accident reports. Current crash reports are brief and list only drivers of the vehicles, allowing fraudsters to file claims for nonexistent passengers. The bill would have required that all law enforcement officials responding to crashes list all passengers as well as drivers to eliminate false claims from "phantom" passengers.
- Harsher penalties for fraud convictions. These would have included civil penalties of $5,000 for first-time offenses and up to $15,000 for third-time offenses, in addition to criminal charges.
- Increased time for investigating claims. The current 30-day time limit for insurers to investigate and pay auto insurance claims allows many fraudulent claims to be approved without further investigation. H.B.1411 aimed to increase this amount of time.
- Stricter requirements for health clinics. Many health clinics in fraud cases are used specifically for elaborate schemes that involve doctors and clinic owners. The bill proposed stricter requirements for owning and operating health clinics, as well as modified billing to eliminate unnecessary medical expenses. Despite the prevalence of auto insurance fraud in Florida, concern about consequences for consumers won out. Critics of the bill argued that its provision about giving insurers more time to investigate possible fraud could make it easier for them to deny or delay paying claims.
Despite the prevalence of auto insurance fraud in Florida, concern about consequences for consumers won out. Critics of the bill argued that its provision about giving insurers more time to investigate possible fraud could make it easier for them to deny or delay paying claims.