Insurance fraud causing hikes in automobile coverage costs

By definition, insurance fraud occurs when companies, agents, adjusters, healthcare providers or consumers intentionally deceive others or misrepresent facts for financial gain.

Each year, insurance fraud costs consumers an estimated $150 billion, an average of almost $1,000 per family in additional insurance premiums. Fraud specialists say well-organized criminal rings have set up phony clinics statewide and they have tracked how thieves stage accidents, and pay the so-called victims, hundreds of dollars.

“When these criminals submit fraudulent insurance claims, obviously that has an effect on the policy premiums of individuals,” insurance investigator Jessica Turner said. “Florida is one of the states that pay the most in insurance premiums, mainly due to the fraud that’s so widespread in this state.”

According to Accenture’s 2010 consumer survey, more than half — 55 percent — of U.S. consumers say poor service from an insurance company is more likely to cause a person to defraud that insurer. Also, one of five U.S. adults — about 45 million people — says it is acceptable to defraud insurance companies under certain circumstances. Four of five adults think insurance fraud is unethical.

Phony medical claims cost Florida consumers about $1 billion a year. That has driven personal injury protection bills on our car insurance up by about 66 percent. Not surprisingly then, consumers are fed up with their growing car insurance bills.

For several years now, professional criminal fraud rings target carriers and flood them with thousands of fraudulent claims. Data management and analysis can eliminate much of the basic fraud. Insurance carriers also can automate advanced warning of possible fraudulent behavior through thorough analysis and categorization of policyholders.

Still, some don’t see it exactly that way. “What’s new is the attempt by the insurance industry to create a drive toward wide-ranging reform,” said North Miami attorney Kenneth Dorchak. “It’s really aimed at increasing insurance company profits and limiting the access of the individual to meaningful healthcare for injuries arising out of an automobile accident.”

The only thing everyone seems to agree on right now is that without some major changes, insurance fraud will get worse, and so will our car insurance bills.

According to a report from the Insurance Information Institute (III), Florida insurers are being forced to pay 70 percent more each year to cover costs associated with fraud, such as staged accidents, excessive or unnecessary medical treatment and inflated or questionable claims.

The III report, released in January, stated that the $10,000 PIP minimum has become a “dollar target” aimed at those looking to game the system.

“If there’s no changes, we will likely have additional fraud, and to add more fraud to what we have it really escalates matters,” Jessica Turner warned. “Our insurance bills will be sky high, even higher than they are now.”

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