Closer Look: Auto Fraud

April 3, 2006

PIP case referrals to state fraud fighters have soared 327 percent from 2002-2003 to 2004-2005. Actual street arrests have grown nearly 75 percent, and cases sent for possible prosecution have soared nearly 50 percent, according to state figures.

With Florida’s staged-accident rings thriving even while serious crimes like robbery and murder are dropping, efforts are underway to notch up the heat against money-draining insurance gangs.

Legislative reforms that try to swing the enforcement pendulum back toward hard-pressed fraud fighters are being pushed by Tom Gallagher, Florida CFO. He would toughen some existing penalties and close loopholes that highly adaptive staged-accident gangs have learned to exploit.

The time is right. Florida is among the staged-accident capitals of the U.S., with no end in sight to the steals-on-wheels.

Large, octopus-like gangs of crooked clinics, doctors, lawyers, recruiters and fake crash “victims” are bilking auto insurers out of millions of dollars a year with phony injury claims. Some say the losses reach $1 billion a year in South Florida alone, and staged-accident rings are also looting upstate insurers.

PIP case referrals to state fraud fighters soared 327 percent from 2002-2003 to 2004-2005. Street arrests have grown nearly 75 percent and cases sent for possible prosecution have soared nearly 50 percent, according to state figures.

Fraud fighters are throwing considerable effort into fighting accident rings, but the harder they lean on the rings, the more crime they find festering out there.

PIP fraud vast, entrenched

PIP fraud may be so vast and entrenched that fraud fighters are dangerously close to being overmatched. The state’s Insurance Fraud Division says it can pursue less than 25 percent of referred leads because of limited resources.

With that in mind, the Department of Financial Services is backing proposals to:

• Make it a second-degree felony to stage “paper” car crashes-putting them on the same crime level as staging real crashes. The penalty for convicted swindlers would be a minimum of two years in jail.

• Tighten public access to accident reports and traffic citations, which crooks use to recruit real accident victims for fake-injury swindles.

• Revoke a clinic’s license if its operator is convicted of a crime elsewhere-not just Florida. This makes it harder for swindlers from other states to set up sham clinics in Florida.

• Yank the driver’s license of anyone who uses a vehicle for insurance swindles.

• Make it a third-degree felony for clinics, body shops and providers to waive deductibles for insured services.

• Require medical clinics to display posters promoting the state’s reward program and fraud hotline.

• Strengthen laws against clinics paying kickbacks to patients for illegal billing schemes.

Special prosecutors effective

Florida recently gave more clout to its fraud laws by hiring Erika Isidron, a second fraud prosecutor, to help fight South Florida accident rings. She joins Nina Vivenzio, who came on board two years ago. Special prosecutors break open the complex and often-insular accident rings with a highly focused legal assault.

Prosecutions have increased 20 percent during Vivenzio’s time, the Department of Financial Services says.

Can two fraud prosecutors drain such a large and stinky swamp? That’s questionable, but at least it’s the right direction.

The fact is, highly focused counterforce does work, if given enough resources.

New Jersey was being overrun by staged-accident gangs. So lawmakers passed a bold package of fraud laws in the late 1990s, and created an entire department within the attorney general’s office solely to prosecute insurance fraud. New Jersey still has problems, but the heat has driven many staged-accident rings across the river into New York.

In Massachusetts, task forces are busting accident rings in cities where many gangs once operated almost unopposed. Suspicious injury claims in some cities now are falling sharply.

And auto premiums finally are dropping in New York, partly because of focused dragnets conducted regularly by law enforcement. NYPD, for example, has deployed an entire unit to tackle auto swindles.

The problem was, and still is, huge. No-fault fraud was so easy that drug dealers have switched to staged accidents because they are more profitable and less risky. But falling auto premiums are a tangible sign of progress.

Whatever its success during this session, Gallagher’s legislative push may focus more public attention on rampant fraud rings-and costly gaps in Florida’s enforcement machinery. The department hopes such efforts-given enough time and tools-will send a public-service message to insurance swindlers: PIP fraud on the sunny streets of Florida is a fast freeway to jail.

Howard Goldblatt directs Government Affairs for the Coalition Against Insurance Fraud. He commented on this topic to the National Council of Insurance Legislators spring meeting in Weston, Fla. He can be reached at 202-393-7332 or Howard@InsuranceFraud.org. Visit www.InsuranceFraud.org.

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Insurance Journal West April 3, 2006
April 3, 2006
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