They Say, Hearsay

Our property insurance rates are high because we're the"hurricane capital" of the U.S. Now, I'm hearing that our autoinsurance rates are high because Florida is becoming the "autoinsurance fraud capital" with staged accidents, fraudulent claims,and phony medical clinics that bill insurers for phantom treatment.What gives — and when are we going to catch a break?

We Say

We all catch a break when criminals who commit insurance fraudare caught, and the chase is on! The National Insurance CrimeBureau (NICB) established its second major medical fraud task forcein Florida last month, the only state with two such units. Thattells you something about the extent of the problem here. Thenewest task force unit is in Tampa Bay, which has wrestled awayfrom South Florida the dubious title of Florida's fraud epicenter.In 2002, the NICB brought the state's first medical fraud taskforce to Weston in Broward County and that — along withconcentrated law enforcement efforts and assistance from theFlorida Division of Insurance Fraud — seems to have promptedfraudsters to move a bit north.

Eye-popping facts and statistics on rising auto insurance fraudhere and nationally cannot be ignored. The NICB recently released areport showing a 14 percent rise in all types of questionableclaims in the U.S. for the first half of 2010 over 2009, with awhopping 527 percent increase in questionable auto glass claimsover that time period. In a separate report on staged accidentclaims from 2007-2009, the NICB put Florida in the number one spotfor staged accident questionable claims with 3,006 staged accidentquestionable claims referred to the NICB by member companies. Bycomparison, the number two state was New York with 1,680 stagedaccident referrals to the NICB.

How is it possible that Florida is the epicenter for stagedaccidents? Point to PIP. The state's no-fault auto insurance lawrequires $10,000 of personal injury protection (PIP) coverage, andthat's a pocket being picked by criminals, shady medical clinics,and certain lawyers willing to sue over a scratched fender.

Fake insurance claims, along with fraudulent inflation of billsfor car damage and injuries, cost the industry millions. Thedramatic rise in PIP fraud is a direct result of the depressedeconomy, so while that explains the increase, it remains an illegalpractice. Some people may not even be aware they are perpetratingfraud, especially when bombarded by advertisements touting1-800-Call businesses that imply entitlement to the $10,000 PIPbenefit. Obviously, many TV viewers believe that guy in thepolice-look-alike uniform when he says to call the attorney andmedical referral service first, not their insurer. Apparently theymiss the small print on the screen that says he's a paid actor.

Matching the PIP pocket pickers dollar-for-dollar in advertisingto inform policyholders to call us first is one strategy to counteradversarial ads; however, a more practical approach would be toeducate at the point of sale and every other chance we get.

As an industry, we talk amongst ourselves about questionableclaims. Customers might like to learn about what we question — andwhy. PIP makes a payday for scammers, and the questions we askensure that we pay what we owe so that policyholders get lowerrates. In its annual report for 2008-2009, the Florida Division ofInsurance Fraud stated that 30 percent of its referrals relate toPIP fraud. If you need more clues that things are out of whack,consider that we are driving safer cars and fewer miles, whileaccident severity is increasing and frequency is trending up afteryears of decline.

Teaching policyholders how not to be victims of staged accidentsis another tactic. There are innocent victims who would appreciateour help in bringing a sense of skepticism to a suspiciousaccident. The NICB has a brochure on staged accident fraud on itsweb site in both English and Spanish with tips, including thesuggestion to carry a disposable camera in your car. Most peoplehave cell phone cameras and using that at the crash scenecounteracts the urge by scammers to inflict additional damage ontheir car after the incident to inflate the cost of the claim. Ourcustomers should also be leery of an accident in which the othervehicle has multiple passengers. Too many times, those uninjuredpassengers claim injuries in the next day or two.

Consider ways to help policyholders develop their own "fraudradar." For example, if they are approached at the car wash orshopping mall by someone who points out a microscopic chip in theirwindshield, their fraud radar should tilt into high alert. Scammersare first making sure victims have comprehensive insurance coverage(which is none of their business), then leading people to believethat a tiny chip leads to a windshield explosion and that they must— immediately — go to their scam ally in the auto glass replacementbusiness to get it fixed.

The problem is that the windshields are not up to insurers'standards, yet the bills to insurers are for dealer-grade quality.Policyholders should know about this scam scenario and alsounderstand that they are being solicited to file an insuranceclaim. Florida is one of only four states allowing no-deductiblewindshield replacement, and scammers take advantage of that.

It's easy to talk about ways to avoid being victimized by thosewho prey on innocent motorists, but very difficult to help peopleresist the urge to take financial advantage of their involvement ina car accident. The Florida Division of Insurance Fraud has anapproach: They say reporting PIP fraud pays more than participatingin it. Providing information that leads to an arrest and convictioncould bring the tipster up to $25,000. The statewide fraud agencyhas won about 1,000 convictions since 2003, and it is getting morefire power with additional staff coming on board.

Most people do not know that insurers are required to haveinternal claim investigation units who look at suspicious claimsand work with law enforcement when necessary. We should be tellingthem. Aggressively fighting suspected fraud keeps down the cost ofinsurance. The Coalition Against Insurance Fraud produced a reportin 2008 titled "Four Faces of Insurance Fraud." It showed thatconsumers have a high tolerance for insurance fraud, with one infive U.S. adults saying it is acceptable to defraud insurers undercertain circumstances.

I don't know what those "certain circumstances" may be, butinsurance fraud is an opportunistic crime. It seems logical toexplain that when an opportunity to commit fraud knocks, wisepeople do not open the door.

Lynne McChristian is the Florida representativefor the Insurance Information Institute. She may be contacted at813-480-6446, [email protected]. Also, see www.InsuringFlorida.org forher insurance blog, "Straight Talk."