Florida Office of Insurance Regulation Using Inaccurate PIP Data to Encourage Changes in Law

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The concern over PIP insurance fraud has been a hot topic in recent politics. Generally, the consensus is that it’s a problem that needs to be fixed. In order to assess the problem more accurately, the Florida Office of Insurance Regulation (OIR) conducted a report. Although studies involving this issue need to be conducted, a recent study found that the data OIR relied on was potentially faulty.
Several flaws in automobile insurance fraud data were found in the recently released Personal Injury Protection (PIP) In the State of Florida Evaluation of Data Collected by the Florida Office of Insurance Regulation (OIR) in Response to April 2011 Data Call. Among some of the issues is the fact that this year’s OIR report on PIP fraud used information from only one insurer, and generalized it in an attempt to make it look like it was a state-wide reflection of insurance premiums. In addition, the OIR used voluntary information from insurers, which was unaudited, they included rate increases that were unconfirmed at the time it was included in the report, they used inaccurate methods of comparing PIP insurance premiums, and they didn’t adjust for inflation (or time value of money) differences when they compared the costs of PIP claims over a period of 5 years (between the fourth quarter 2005 and the third quarter 2010). The result of these inaccuracies is that data becomes skewed and the severity of the situation becomes exaggerated.
Many Floridians are concerned about the rising problem of insurance fraud. Not only is insurance fraud a crime, but it also results in increased premiums for policy owners. The Florida Consumer Action Network (FCAN) is an organization that promotes democracy in matters involving the economy, politics, society, and the environment. Although FCAN agrees that PIP insurance fraud is a problem, they believe that regulators who are too influenced by the insurance industry are going about it the wrong way. The most recent and concrete proof of this is the newly released OIR report, which FCAN is claiming relied on faulty data.
FCAN stands by the premise that “the right to trial by jury and access to counsel are important tools for consumers to stand up to corporations.” Insurance fraud may be a rising problem, but for the insured who are truly injured because of an automobile accident, it is important that their rights to a trial by jury and access to counsel are preserved.
After FCAN released their concerns over OIR’s reliance on faulty data, OIR released a report claiming that they were standing by their findings. The short-sighted view focuses on immediately slashing insurance premiums, while a long-term outlook focuses on a thoughtful approach to changes in legislation which will eventually result in lower incidences of PIP insurance fraud and in turn, lower premiums for Floridians. In addition, a look at how law enforcement handles suspected incidences of insurance fraud may be warranted.
With the economy in a slump, many Floridians are looking to cut costs wherever they can, but relying on faulty data and agreeing to hasty changes can result in long-term problems. We’re not looking for a band-aid. More accurate studies should be conducted in order to allow for a more educated discussion on PIP reform.