By Diana Rosenberg, BestWeek
September 6, 2011
Addressing the fraud and abuse plaguing Florida's mandatory personal-injury protection coverage in automobile insurance is a "vexing problem," state Insurance Commissioner Kevin McCarty told Best's News Service. The state may even consider doing away with the current no-fault system, he said.
Marshalling the resources to fix the problems will be "challenging," McCarty said. "And you really have to wonder, is that kind of investment worth it for a $10,000 benefit?"
Florida's no-fault auto insurance, designed to quickly provide benefits for people injured in accidents regardless of fault, was implemented in 1972. Florida drivers are required to carry PIP coverage, which provides $10,000 per person for medical bills. In the wake of a 2000 grand jury report on fraud and abuse in the system, the legislature enacted anti-fraud provisions in 2002, 2003 and 2007, McCarty recently told theFlorida cabinet.
Despite those efforts, there are "fraudsters and hucksters — who have perfected the system of finding the weak points and taking advantage of that," McCarty told the cabinet, adding, "This is a contagion that is going across the state."
McCarty said his office will be working with legislative leaders, consumer advocates and others to determine what should be done.
"If there's a way for us to make some meaningful change to PIP, that will rein that in, we'll make those recommendations," McCarty said. "The question I think is — is it a time for us to just abandon that system, and I think that we're probably very close to that determination."
McCarty said a lack of consensus among insurers and trade groups about how to tackle PIP fraud and abuse is "part of the problem."
The American Insurance Association, a trade organization representing about 300 insurers, is calling for the elimination of mandatory PIP coverage in Florida. The Florida Insurance Council is still developing its position on the issue, concerned with what will replace PIP if it is repealed. Two other trade groups, the National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America, have said they are reviewing all options (Best's News Service, Aug. 31, 2011).
Asked if a consensus among various constituencies, including lawmakers and consumer groups, can be achieved, McCarty responded, "Well, I suppose there is that possibility, and I suppose we should remain cautiously optimistic ... but it hasn't worked in the past. And it's not like we haven't made a Herculean effort."
Florida tops all states in the United States for staged accidents. Questionable claims for staged accidents inFlorida totaled 2,779 last year, up 39% from 2009, according to the National Insurance Crime Bureau. Ron Poindexter, director of operations for the southeast with the NICB, has said the $10,000 per individual PIP coverage, with 11 million cars in Florida, is "a huge pot of money" that unscrupulous individuals are using as their "personal slush fund" (Best's News Service, Jan. 31, 2011).
The Insurance Information Institute estimates Florida residents paid a "fraud tax" of about $50 a vehicle last year, and, if nothing is done to fix the problem, the "fraud tax" could amount to $84 a vehicle this year.
Florida's new insurance consumer advocate, Robin Westcott, is forming a working group to develop policy ideas to combat skyrocketing auto insurance costs and will consider repealing PIP. Westcott expects the working group to hold its first meeting this month and have recommendations by November before committee work starts for next legislative session.
Despite widespread support from the insurance industry, consumer groups and the state's chief financial officer, legislation to rein in no-fault auto insurance fraud failed in the last legislative session (Best's News Service, April 28, 2011).
The top five writers in Florida, according to BestLink, which provides online access to A.M. Best's database of insurance information, are State Farm Group, with 20.85% market share, Berkshire Hathaway Insurance Group, with 16.27%; Allstate Insurance Group, with 13.97%; Progressive Insurance Group, with 10.92% and USAA Group, with 5.63%.
To hear the entire interview with McCarty, visit http://www.ambest.com/media/media.asp?RC=191292.