Insurance fraud hurts everybody. According to research from the University of South Florida, insurance fraud averaged $30.3 billion a year from 2000 to 2011. With such massive fraud throughout the insurance industry, the average consumer faces increased premiums on everything from home to auto insurance.
A staged accident involves orchestrating an injury for the sole purpose of collecting a profit for fake property damages or alleged medical care. This has become a major problem for insurance companies. For example, from 2002 to 2012, reports of staged automobile accidents increased by more than 200%.
No-fault insurance (a.k.a. Personal Injury Protection, or PIP claims) allows policyholders to collect damages directly from their primary insurance provider for minor injuries/damages, and for the purpose of streamlining the tort system. PIP is a type of insurance that has been criticized for inciting more fraud, though there is no evidence to verify this claim. In fact, fraud has been rampant in states with and without no-fault insurance.
State Legislatures and Insurance Companies
Through efforts of self-preservation, some insurance companies are looking for ways to save in states that have implemented no-fault insurance systems.
Michigan, for example, has a mandatory no-fault system, which requires all drivers to carry such insurance. However, in 2015, the state’s senate approved a reform bill that adversely affects no-fault policyholders in Michigan. This reform directly limits or caps compensation for in-home attendant care provided for a family member to $15 per hour. Moreover, it placed price controls on physicians and medical facilities that treat victims of car accidents. Interestingly, the insurance industry contributed more than $200,000 to five of the senators who helped pass the bill in Michigan.
To address the problem of insurance fraud, more criminological investigations must be conducted to uncover the nature of claims, especially in states with no-fault insurance. Currently, the following 12 states have some version of no-fault insurance: Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah.