The Impact of Auto Insurance Fraud on the Industry
Auto insurance fraud is a common form of white-collar financial fraud. In its most usual form, a ring of corrupt health care providers conspires to defraud insurance companies by staging accidents and having the ""victims,"" who are actually paid a percentage of the fraudulent take, file bogus claims. The participants may include medical and dental clinics, physical therapists, orthopedic and medical supply companies, and pharmacies, as the injuries which are claimed often include diagnoses of chronic pain or disability which require prolonged or even lifetime treatment.
At one time, this type of fraud was easier to commit undetected, as medical claims in general were paid quickly and with little scrutiny. Now, with the rising costs of medical care, and the increasing use of computerized systems to audit claims, insurance companies are able carefully inspect every claim, and their computer systems are designed to root out fraud. However, far too much fraud still goes undetected, and law enforcement has had to rely on informants rather than insurance companies themselves to break the rings and arrest the perpetrators of this costly form of fraudulent activity.
Recently, dozens of participants in an ongoing auto insurance scam were arrested in Florida. The scam was a very typical one, in which the first level of participants staged minor accidents but claimed that they had sustained injuries. The accident participants then had claims filed for them by a ""fraud mill,"" a clinic which was set up by the masterminds of the scam solely to file insurance claims. The ""fraud mill"" simply asked the participants to sign insurance forms, which were then filled out by the illegal clinic and sent to various insurance companies. Since Florida drivers carry a mandatory PIP, or personal injury protection, policy as part of their auto insurance, there is no need to prove fault or to adjudicate any claims - they can simply be submitted for reimbursement to auto insurers.
In this case, it was the Florida Division of Insurance Fraud, with the assistance of the U.S. Secret Service, which put an end to the fraud. A spokesperson for the Florida Division of Insurance Fraud estimates that legitimate auto insurance policy holders have paid $50 extra in annual premiums because of the cost of these fraudulent claims. This means that, unless the industry takes measures to prevent this type of fraud before claims are paid out, it is the honest consumer who repays the money that was in essence stolen by the criminal rings.
Insurance companies lose tens of millions of dollars per year to fraudulent claims. With technology as sophisticated as it now is, efforts need to be made to prevent fraud long before it affects the insurer's bottom line and forces companies to raise premiums in fraud-heavy areas such as Miami-Dade County in Florida. In this particular case, the entire no-fault structure of Florida auto insurance was imperiled by this large-scale fraud, as it depended on personal injury protection insurance claims where no judicial process is necessary to determine responsibility.
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