Research shows: Florida’s no-fault law is no fair

After years of studying Florida’s no-fault auto insurance provision and many failed attempts to reform the system, it is clear that a system holding a driver who causes an accident responsible for any injuries would be fairer and less expensive for Florida drivers than the current no-fault system.

Numerous studies support returning to a fault-based system:

National Association of Insurance Commissioners (NAIC), 2004 Data

www.iii.org/media/facts/statsbyissue/auto/

Findings:
Auto insurance expenditures in Florida are consistently among the costliest in the nation and are getting worse.

Insurance Research Council (IRC) “Florida Auto Injury Insurance Claim Environment Report” (March 2006)

www.ircweb.org

Findings:
Rapidly increasing costs, combined with less serious injuries, explosive growth in the utilization of chiropractic services and extensive attorney involvement in no-fault claims in Florida are red flags indicating that Florida’s no-fault system is in trouble.

• More attorneys involved in no-fault claims – 45 percent in 2005, up from 34 percent in 2002
• Chiropractors are making increasingly more off no-fault claims
  • 44 percent of all claims included chiropractic charges, up from 33 percent
  • Total charges are up 35 percent to $6,510
• Eighty-seven percent of claimants had less than 10 days of restricted activity and 73 percent claimed a strain or sprain was their worst injury -- both down from previous years
• Average claims payments increased 24 percent
• Inflation was only 9 percent and medical services inflation was 13 percent

National Insurance Crime Bureau (NICB) (March 2006)

www.nicb.org

Findings:
Rampant fraud is increasingly a problem across the state. Of the top ten cities with the most staged accident activity in the nation, Florida is home to three -- Tampa, Orlando and the number one city for staged accidents, Miami.

• Top Ten Cities with the most staged accidents and related insurance fraud:
  1. Miami
  2. Los Angeles
  3. Houston
  4. Chicago
  5. Philadelphia
  6. Tampa
  7. Cleveland
  8. Orlando
  9. New York
  10. Boston
  
• Staged or “caused” accidents are but one of the numerous kinds of fraud committed daily around the country
• Staged accidents contribute to the $30 billion lost annually to fraud
• These losses are ultimately recovered through increased premiums

Senate Committee on Banking and Insurance Analysis of Florida’s Personal Injury Protection (PIP) no-fault motor vehicle insurance system (November 2005)

www.flsenate.gov/data/committees/senate/bi/PIP_FinalReport.pdf

Findings:

Consumers pay dearly for fraud and abuse - “Florida’s Chief Financial Officer estimates that insurance fraud costs the average Florida family as much as $1,500 a year in increased premiums and higher costs for goods and services. Motor vehicle insurance fraud and abuse constitutes a large part of these costs.”

Consumers pay higher than average premiums.

• The combined average premium per insured vehicle in 2002 was $931.15, the 14th highest among the states.
• Florida premiums were 69.7 percent greater than the seventeen (no-fault)-state average (as of the 2005 2nd quarter).

The no-fault system is vulnerable to a myriad of schemes and is exploited by sophisticated criminal organizations

• Schemes involve:
  • health care clinic fraud,
  • staging (faking) car crashes,
  • manufacturing false crash reports,
  • adding occupants to existing crash reports,
  • filing no-fault claims using contrived injuries,
  • colluding with dishonest medical treatment providers to fraudulently bill insurance companies for medically unnecessary or non-existent treatments,
  • and patient-brokering (referring patients to medical providers for a bounty).

Health clinics feeding off the no-fault system - Division of Insurance Fraud intelligence indicates that ‘hundreds’ of unlicensed clinics, primarily in the South Florida area, exist for the sole purpose of perpetrating no-fault fraud.

Clinics complicit in a host of scams.

• fraudulent providers (who fabricate their credentials, bills, or the office itself)
• medical mills that provide treatments that are not medically necessary, purposely miscode diagnosis, inflate bills or charge for services that are not rendered
• ‘doc in the box’ schemes where often older medical providers are paid for the use of their license

No fee schedule to contain no-fault medical costs - “Health care providers are not required by law to adhere to a fee schedule or utilization protocols for no-fault in Florida except for a limited number of specified diagnostic procedures…Florida does apply a fee schedule under its worker’s compensation law and for Medicaid.”

Colorado Department of Insurance Presentation to Auto Insurance Interim Committee (September 10, 2005)

www.dora.state.co.us/insurance

Findings:

When Colorado ended its no-fault insurance consumers came out ahead.

• The Colorado Department of Insurance reported that when no-fault ended there, a 1 percent increase in healthcare premiums ($35) was more than offset by 21-31 percent rate decreases in auto insurance ($265 – $301).

Additionally, the department reported that not all health insurance companies filed a rate increase once no-fault was repealed in Colorado.

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