A fraud common in institutionalized financial companies is auto insurance 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. Medical institutions such as physical therapists, pharmacies, dental clinics and orthopedic and medical supply companies are often included as participants in such claims as the injuries require various diagnoses for disability or chronic pain which may need prolonged or even life-long 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.
Due to the number of fraudulent claims, insurance companies incur tens of millions of dollars in losses per year. Before insurance companies are forced to increase premiums in areas where fraudulent claims occurs frequently, such as Miami-Dade County in Florida, efforts need to be made immediately with the advanced technology we have available today. 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.