Auto Insurance Fraud: Florida Must Act Now

This was developed by the Florida Insurance Council to support anti-fraud legislation (HB 1447) proposed during the 2010 session. The bill did not pass, but will be introduced again during the 2011 session. The Legislature did approve $1.2 million for dedicated insurance fraud prosecutors in Orlando and Tampa.

Florida is in the midst of an auto insurance fraud crisis. The Florida Legislature needs to act now, before the crisis becomes an emergency.

The last time Florida faced an auto insurance crisis, some seven years ago, the problem was staged accidents and dishonest clinics, and the epicenter of the problem was Miami-Dade County. Today, the problem is staged accidents and dishonest clinics, and the epicenter of the problem has moved north to Tampa and Orlando.

The kinds of insurance fraud that create hundreds of millions of dollars in unnecessary costs for honest consumers often involve staged accidents, invoices for treatments were not performed, or claims from passengers who weren’t injured or weren’t even in the vehicle at the time of the crash.

The statistics for staged crashes—which are also a good indicator of general trends—may surprise you. For at least the last three years, Florida has led the nation in the number of staged crashes, according to the National Insurance Crime Bureau, with almost twice as many staged crashes as New York State, which is in second place.

The growth in the number of staged crashes over the past three years is disturbing. Staged crashes in Florida were 20 percent higher in 2008 than they were in 2007, and then grew by another 50 percent between 2008 and 2009.

Today, Florida is home to five of the top ten cities for staged crashes: Tampa (ranked second in the country), Orlando (fourth), Miami (fifth), West Palm Beach (seventh), and Hialeah (ninth). In Tampa, the number of staged crashes doubled between 2007 and 2008, and then tripled between 2008 and 2009. The trend in Orlando was almost as dramatic.

The crime bureau statistics tell us that auto insurance fraud is once again a crisis for Florida, and the problem is growing rapidly. That’s why I’m urging my fellow legislators to act now.

The Florida Insurance Council is supporting House Bill 1447 that will attack the problem directly. The bill addresses three core areas:

  • Funding for prosecutors and investigators. Insurance fraud stops growing when we have enough fraud investigators on the streets and fraud prosecutors in the courthouse. A small investment in prosecutions can create tremendous benefits for Florida consumers. Given the state’s budget shortfall, my approach is to create a foundation that can receive voluntary contributions and give grants to state attorneys and regulators to cover some of their costs for insurance fraud prosecutions and investigations.
  • Glitches and loopholes. Public sector and private sector fraud investigators have provided valuable advice on a number of small statutory changes that, taken together, can have a huge impact. For example, when a police crash report has to list all of the passengers involved in a crash, it’s much harder for a clinic to collect charges for treatment of a person who was not actually involved in the crash.
  • Clinic license fraud. As part of an earlier round of insurance fraud legislation, Florida began licensing health care clinics in 2003. Today, according to fraud investigators, many clinic owners fraudulently obtain an exemption from licensure. Clinic license fraud enables felons and scam artists to own clinics—contrary to the intent of the legislators who passed the original licensing law seven years ago—and to use their clinics to facilitate insurance fraud. My bill tries to provide tough economic sanctions for clinic license fraud. The fraudulent clinics will go away pretty quickly when their invoices don’t get paid and their assets may be subject to seizure as contraband.

It is not often in public life that you have the chance to solve a problem before it becomes an emergency, but that’s where we are with auto insurance fraud. If the Florida Legislature acts now, we can protect consumers and maintain a healthy auto insurance market. If we fail to act, things could get very bad very fast.