Jacksonville Business Journal: Fraud helps drive auto insurance hike requests in Florida

The Jacksonville Business Journal published this article on February 12, 2010.

by Rachel Witkowski Staff Writer

A spike in fraudulent auto insurance claims last year added to rising costs for insurance companies in Florida, forcing auto insurers to file average statewide rate increases of between 9 percent and 16 percent.

Florida leads the nation in staged automobile accidents under question, which jumped 48 percent to about 1,262 in 2009 compared with 2008, said Ron Poindexter, a director of operations at the National Insurance Crime Bureau. Bogus insurance claims in which individuals get into a vehicle before the police arrive, called “jump-in passengers,” spiked 32 percent in the state last year.

These types of fraud allow the insured to collect benefits from insurance companies through Florida’s Personal Injury Protection benefits, or PIP.

“First of all, it drives up the cost for insurance premiums [on the insurance companies], which are probably passed on to insurance consumers,” Poindexter said. “And it presents a plague on the economic system in Florida.”

While rising costs were the main reason two of Florida’s largest auto insurers – State Farm Insurance and Allstate Fire and Casualty Insurance Co. – filed rate increases for their auto policies, fraud claims did play a factor.

“With Allstate, a lot of it has to do with the cost of doing business in Florida,” said Allstate’s spokeswoman for Florida, Amy Moore. “We’ve seen an increase in costs for bodily injury medical payments, PIP and uninsured motorists. An increase in fraudulent activity” was also a factor.

In January, Allstate Fire and Casualty’s statewide average 16 percent rate increase went into effect for its auto insurance policies in one of its books of business, which represented less than 20 percent of its auto insurance customers in Florida, Moore said.

The increase equates to an average $82 increase for a six-month policy.

The rate increase, which was approved by the Florida Office of Insurance Regulation in October, was the first time Allstate filed for an increase in that particular book of business. It is also the only book of business for which the insurer is still writing new auto insurance policies in Florida. Allstate insures 1.7 million cars in Florida, Moore said.

Most recently, Florida’s largest auto insurer, State Farm Mutual Automobile Insurance Co., filed for a statewide average rate increase of 9 percent and the 12th largest auto insurer, State Farm Fire and Casualty Co., filed for an average 11.8 percent rate increase Feb. 1.

State Farm spokeswoman Michal Connolly said although these particular filings are due to covering the rising cost of claims, “in general, any type of auto insurance fraud is going to impact rates.” If approved, the rate increases would go into effect June 2.

Poindexter said he has seen one insurance company close 17 stores in the Tampa Bay area largely due to increased costs in fraudulent and questionable claims.

Florida has led the nation in staged automobile accidents for several years, where it has spread from the Miami/Fort Lauderdale area to dominating in the Tampa Bay and Orlando areas, according to the bureau.

“It has been a serious problem in Tampa and Orlando for a couple of years, but it hasn’t reached epidemic proportions until now,” Poindexter said.

In December through January alone, more than 300 queries were submitted to the bureau relating to staged accidents, jump-ins and PIP clinic fraud claims in the Tampa and Orlando area.

The spike in questionable claims could be because of the population increase and people in South Florida moving north into Central Florida as well as the state of the economy, Poindexter said.

While such claims have not spread as quickly in Jacksonville as they have in Orlando and Tampa Bay, Poindexter added that the bureau is starting to see an increase in the area and has placed agents in Jacksonville.

Insurance industry advocacy groups such as the Florida Insurance Council, the bureau and the Florida Office of Financial Regulation are supporting a proposal under way in the Florida Legislature that would curb insurance fraud, in particular, staged accidents and PIP clinic fraud rings and suspicious claims involving sinkholes, inspections for hurricane mitigation discounts and workers’ compensation.

rwitkowski@bizjournals.com | 265-2219