By Kevin McCarty
Florida Insurance Commissioner
Florida’s leaders showed vision by enacting the first-in-the-nation Motor Vehicle No-Fault Laws that became effective in 1972. Commonly referred to as Personal Injury Protection (PIP), the goal was to help accident victims by reducing legal delays, streamlining the payment process, and providing an automatic “pot of money” for injured drivers to take care of immediate injuries through visits to doctors and hospitals.
Unfortunately, if you say the word “PIP” today, one does not think of the benefits of this innovative legislation. Instead, PIP conjures images of proliferating pain clinics, billboard advertisements littering Florida’s highways, and catchy television and radio jingles all aimed at gaming the system. Clearly, the law is not working as it was originally intended.
Instead, the law that made emergency medical care “quick and easy” for accident victims has been targeted by fraudsters and hucksters who have perfected methods for exploiting the system by creating a cottage industry unique to our state. The National Insurance Crime Bureau reports that Florida now leads the nation in staged auto accidents where numerous alleged “passengers” each access their $10,000 of PIP benefits from providers who are neither licensed, nor have an identifiable address.
This pervasive fraud has led to a number of other market distortions. From 2008 to 2010, the amount Florida insurers paid for PIP benefits increased from $1.45 billion to $2.45 billion – a 70 percent increase. This increase is even more astounding when you consider the number of drivers was constant, and the overall number of reported traffic accidents actually declined during the same period. Ironically, the number of lawsuits also doubled in the last two years, which undermines the entire premise of the “no-fault” legal system.
The Florida Department of Financial Services under the leadership of Chief Financial Officer Jeff Atwater has done an admirable job in attempting to prosecute those perpetrating fraud, but the growth and sophistication of this cottage industry has outstripped both government resources, and the resources of insurance companies to investigate fraudulent activity. PIP only represents two percent of all insurance premium collected annually in Florida, yet accounts for 50 percent of all fraud referrals. When one fraud ring is shut-down, another one takes its place.
Gov. Scott made PIP fraud one of the focal points of his administration’s goals this legislative session and he featured it prominently in his State of the State address. PIP fraud has become more than an arcane insurance issue – it directly affects Florida’s families, and negatively impacts Florida’s economy and the governor’s goal of job creation. Our Office began a review of the PIP structure in 2010 by conducting a data call of leading PIP writers in our state. In our report, issued to the Florida Legislature in April of 2011, we reached one indisputable conclusion: PIP claims are a major cost-driver of auto insurance rates, and the cost trajectory is simply not sustainable.
To fix the problem, we must return PIP to its original mission – to provide emergency care for injured passengers. To accomplish this mission, we need legislation that encompasses four primary components: 1) limiting providers and venues for providing PIP coverage 2) creating a reasonable fee and utilization schedule 3) targeting a reduction in litigation costs, and 4) improving methods for investigating fraud.
More specifically, we need to move away from “fly-by-night” PIP benefit providers, and instead rely on more traditional providers of emergency care such as EMS services, emergency care facilities, hospitals, and follow-up care ordered by physicians. A 72-hour window for accessing PIP benefits will also decrease fraud. Creating a fee schedule based on Medicare will be helpful, but we must also put in place incentives to decrease over-utilization. Lowering litigation costs should also be a priority. Finally, we need to give law enforcement more tools to investigate fraud including a requirement that police officers fill out uniform accident reports.
Let me be clear, requiring Florida drivers to have Personal Injury Protection (PIP) may be a good idea. Yet, our state cannot continue to endure fraud and rising insurance costs as a result of this well-intentioned law. Instead, we must overhaul the system to return PIP to its original purpose. We need to structure PIP laws to make emergency medical coverage quick and easy for accident victims – not quick and easy for fraudsters and hucksters.