Is PIP Insurance Fraud Rampant in Florida?

The average payout for a personal injury protection claim increased over the past seven years — but not enough to keep up with the inflation rate for health care.

The conviction rate for suspicious personal injury claims has dropped since mid-2007, even though the state beefed up its fight against fraud.

Each Florida driver\’s premiums were about $50 higher last year, the insurance industry says, to cover the cost of fraudulent claims, what insurers call the \”fraud tax.\”

Florida legislators are at work on laws, backed by major insurers and some consumer advocates, to combat what they say is \”rampant\” fraud by policyholders and health care providers filing PIP claims. The proposed legislation would, among other things, make it more difficult for people to file claims and for lawyers to collect huge fees.

Personal injury protection, or PIP, pays medical bills for policyholders injured in auto accidents, regardless of which driver is at fault. It\’s intended to protect Floridians who don\’t have health insurance and to avoid lawsuits and their costs for minor injuries. Florida drivers are required to carry $10,000 worth of coverage.

Most people weighing in at legislative meetings agree with the goal of fighting fraud, but lobbyists for the legal and healthcare industries are pushing for that without hurting people who have legitimate claims.

Lawmakers drafting legislation say there\’s a \”mountain of evidence\” on PIP fraud, but most of the key data come from insurance industry groups, with some from the Department of Financial Service\’s Division of Insurance Fraud.


Since 2004, the average claim paid out for PIP claims has gone up 22 percent in Florida, according to information the Insurance Information Institute submitted to legislators. The cost of medical care has gone up 26 percent nationwide.

Bob Hartwig, president of the Institute, said he doesn\’t know why average payouts haven\’t kept up with the cost of medical care, although he speculates it may be a result of the $10,000 limit on required coverage.

Insurance companies are concerned, he said, because the number of no-fault claims per 100 policies increased 32 percent since 2008. That number increased 2 percentage points since 2004.

\”You\’re only looking at half the problem if you look at the increase in costs,\” he said. \”There\’s no good reason [there are] one-third more no-fault auto claims in Florida. It\’s pretty clear proof that there are some significant problems.\”

No legislative committee has studied whether more people may be filing PIP claims because they lost their health insurance when they lost their jobs. Florida\’s unemployment rate more than tripled to 11.5 percent in 2010 from about 3.3 percent in 2006.


State Chief Financial Officer Jeff Atwater and many legislators point to the number of suspicious claims when they say there\’s a \”mountain of evidence\” of PIP fraud in Florida.

The National Insurance Crime Bureau, an insurer-funded nonprofit group, said insurers reported 3,006 \”suspicious\” staged accident claims in Florida from 2007 to 2009. That put Florida at the top of its rankings. Questionable claims make up less than 1 percent of all claims submitted by policyholders nationwide, the group says.

It does not keep data on actual wrongdoing, or convictions — which would be more meaningful than complaints, some critics say.

The state\’s Division of Insurance Fraud said 5,543 cases of possible PIP insurance fraud were reported by insurance company representatives, policyholders, attorneys and others in the 12 months ending June 30. That was up 53 percent from the year before.

Bill Newton is executive director of the Florida Consumer Action Network, which supports some of the bills filed. He said information on suspicious claims \”isn\’t that meaningful.\”

\”Somebody could think a claim is bad because they heard Florida has a lot of suspicious claims,\” he said. \”It is generally acknowledged in the industry that Florida has got a lot of fraud. Not just auto fraud, Medicare fraud, you name it.\”

The share of claims proven fraudulent has declined since mid-2007, according to data from the Division of Insurance Fraud.

Since mid-2007, the share of suspicious claims that resulted in convictions has dropped from 8 percent to 4 percent, the division said.

Since 2009, the Division of Insurance Fraud has beefed up efforts to combat fraud, creating dedicated law enforcement teams to investigate PIP fraud in Broward and Palm Beach counties and the Orlando and Tampa areas.

About a year ago, the division created the position of statewide PIP coordinator to train investigators in other parts of the state to fight fraud as the agency has in South Florida. Recently, a second law enforcement squad was added in Tampa and a third in Miami, said Steve Smith, the PIP coordinator.

Newton, of the Florida Consumer Action Network, said lower conviction rates may mean prosecutors are more successful at deterring crimes or negotiating settlements.

Convictions can fluctuate for a variety of reasons, said Jim Quiggle, a spokesman for the Coalition Against Insurance Fraud, an insurer-funded group that includes consumer advocates on its board.

Investigations can involve large, complex gangs and take years, so convictions can decline or spike some years, he said. States may lose funding to fight fraud some years. Health providers sometimes withdraw claims during fraud investigations, thwarting convictions, he said.

Sometimes, Quiggle said, big law enforcement success can come from a few convictions. \”The convictions could be of high-value ring organizers, such shady doctors or lawyers, whose convictions can gut a staged-crash gang,\” he said.

Plus, convictions and referrals can happen during different years, said Alexis Lambert, a spokeswoman for the Department of Financial Services, which oversees the insurance fraud division.

\”The referrals may have dropped over some years as a result of some of our own internal changes with the way we identify or track the referrals,\” she added.

Fraud tax

The Insurance Information Institute calculates a \”fraud tax\” — an amount each driver pays to cover the costs of PIP fraud. The \”tax\” almost doubled from 2009 to 2010, the institute says, and is projected to hit $83.79 this year.

\”It is unfair and unconscionable that every person who buys an auto insurance policy in the state of Florida is paying for the thieves,\” Atwater told legislators in January.


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