Florida fraudsters are gaming the state's insurance system -- and law-abiding drivers are paying for it.
The Insurance Information Institute has calculated what it calls Florida's "fraud tax." This isn't an actual tax, but the amount in extra premiums drivers have to pay to make up for criminals who are milking their state's no-fault insurance system. In 2011, the fraud tax totaled $658 million, a 7 percent increase from the previous year. That breaks down to nearly $60 in extra premiums per vehicle. For a family with two cars, that's an extra $120 a year.
The crux of the problem is that Florida is a no-fault insurance state. No-fault insurance systems allow drivers to collect money for their injuries and lost wages from their own insurance companies, no matter who's at fault in the accident. By contrast, tort states (which the majority of states are) require drivers to recoup damages from the at-fault party's insurance. Originally intended to cut down on the number of disputes that went to court, no-fault auto insurance has plenty of loopholes that criminals can manipulate.
According to the Insurance Information Institute, Florida has become a hotbed for crooks who want to cash in. For example, members of crime rings will stage accidents and feign injuries. They then will go to an unscrupulous doctor who's also in on the scheme. That doctor will provide unnecessary care (or no care at all) and bill the insurance company of the "victim." Everyone involved in the scam then divides the spoils.
All of this unnecessary care results in big payouts for the crooks and a lot of money down the drain for insurers. According to the Insurance Information Institute, the average no-fault insurance claim was more than $8,500 in 2011. All those extra claims add up -- and insurers will turn to policyholders to recoup their losses. That's where that $60 premium hike (the fraud tax) comes from.
Besides Florida, 11 other states have no-fault insurance systems. But according to the National Insurance Crime Bureau, no-fault fraud is most rampant in Florida, which had more than 3,000 questionable insurance claims stemming from staged accidents between 2007 and 2009.
In addition to robbing their fellow drivers of their hard-earned cash, some criminals even will exploit them in their schemes, using innocent drivers to stage accidents. This video from the National Insurance Crime Bureau shows how it's done.