Florida Premiums May Rise If No-Fault Auto Insurance Sunsets
09/20/07 - 11:23 AM EDT
Melanie Dufour
The no-fault system has obvious benefits for policyholders: They don't have to wait for a determination of who was at fault (and whose insurance company is going to pay) to be reimbursed. Unfortunately the system has been badly abused in Florida. Fraudsters stage deliberate "accidents" in which the injured "victims" are referred to participating medical clinics that pile on unnecessary claims.
The Insurance Information Institute points out that the Florida system is particularly prone to abuse because it doesn't limit reimbursements to doctors and hospitals. It says fraudulent claims have been a major driver of rising auto premiums in the state. The Florida Department of Financial Services says 370 phony accident victims have been arrested since 1999. It puts the cost of fraudulent claims to residents at as much as $250 per family annually. Moving to a tort system will undoubtedly cut down on fraudulent claims, and insurers say they will pass this savings on to consumers. State Farm, the largest auto insurer in Florida, says it will reduce average rates by as much as 16% once the current law expires. But a study conducted by Pinnacle Actuarial Resources in March of this year estimates that $55.72 million of the $1.36 billion of total PIP medical claims expected to be submitted next year would no longer be reimbursed by auto insurers under a tort system. It says that only an estimated 16.4% of this would be covered by health insurers, leaving emergency medical systems, doctors, hospitals and injured drivers on the hook for the rest.
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