Insurance Fraud, Essay Example

Florida’s Governor Rick Scott and state’s legislators have decided to tackle the issue of insurance fraud that costs drivers nearly $1 billion in insurance premiums (Bousquet and Sanders). One of the most serious challenges is fraud in personal injury protection (PIP). The proposals under investigation by the state lawmakers include caps on attorneys’ fees, limits on how many times patients can undergo procedures such as massage therapy or chiropractic care, stricter regulation of storefront pain clinics, hiring of more fraud investigators, and giving insurers more than the 30 days under current law to determine the legitimacy of the claims.

As some of the critics including Sen. David Simmons argue, PIP should be abolished because there will always be a potential for fraud. Rep. Mike Horner presents a feasible solution that PIP should be abolished in 2014 and replaced by compulsory bodily injury insurance and an inexpensive emergency medical payment. It is not surprising that the only parties interested in preserving PIP are hospitals and the insurance companies.

The intention behind PIP was to protect the rights of those who suffer injury in automobile accidents but the law has failed to achieve its intended purpose and instead has become a lucrative fraud tool. If past experience is any indication, the PIP insurance fraud has proven to be very difficult to control and this is not the first attempt to contain PIP fraud. The objective should be to protect consumers’ interests and why not look for alternative solutions that will increase the society’s overall welfare. Compulsory bodily injury insurance will not only be more effective in ensuring that only credible injury claims are made but will also mean lower overall insurance premium costs for the consumers. The support of PIP by the insurance industry should also be a red flag because the industry would logically want to protect sources of high premiums, using PIP insurance fraud as an excuse.

Insurance industry rep argues that antitrust laws are the reason the industry can’t provide the information request by the state lawmakers to tackle the issue of PIP insurance fraud. The rep’s argument doesn’t hold much weight because the benefit to the society by provision of any information will most probably outweigh the costs. In addition, legal experts have not been consulted whether the rep’s claim of antitrust laws’ violations is valid or merely an excuse to protect the industry’s interests. The industry rep has also not been specific as to how the antitrust laws may be violated, thus, the lawmakers should seek more detailed explanations because the issue at hand is a matter of major public interest.

But if PIP cannot be abolished than the time frame should be extended beyond the 30 days to give more time for investigation and force the insurance industry to lower its premiums. The industry might have an excuse that 30 days is too small a time frame to do proper investigations, thus, they have no choice but to process the claims. It is clear that PIP is not sustainable in its current state because despite more than three decades since its passage, the state government still has not been able to prevent its widespread misuse. The billion dollars that the state drivers are forced to pay in premiums due to abuse of PIP is too significant an amount to ignore because PIP model can be improved by lawmakers as well as monitoring and control tools can be implemented by the insurance industry at much lower costs.

Reference

Bousquet, Steve and Katie Sanders. Florida tackles car insurance fraud. 18 November 2011. 21 November 2011 <http://www.miamiherald.com/2011/11/17/2507238/florida-tackles-car-insurance.html>.