Lawmakers are considering replacing Florida’s no fault auto insurance law. Currently, Florida is one a dozen states with no fault insurance laws. These laws are designed to keep insurance premiums low, but Florida has the fifth highest premium rates in the nation.

As a replacement, lawmakers are considering a mandatory bodily injury (BI) coverage system. Whereas Personal Injury Protection (PIP) protects the driver, BI protects the other person injured, placing the fault on the negligent party.

A flawed system

PIP coverage requirements have not been raised since 1979. Currently the law requires drivers to carry a minimum of $10,000 of both PIP and Property Damage Liability (PDL) coverage, but the system has been criticized for problems with fraud.

Each year the Florida Department of Financial Services investigates thousands of cases of PIP fraud. Over a three year period there were more than 4,000 cases of PIP fraud. One of the reasons PIP is so easily abused is that the payouts are typically quick, and so many fabricated claims are made to quickly reach the $10,000 maximum.

A national problem

Florida is not the only state struggling with no fault auto fraud. New York State drivers are bearing the cost of higher premiums as auto insurance fraud rampages throughout the state. Staged car accident crime rings are becoming a statewide problem. Fake passengers are recruited to take part in a low speed “crash,” after which they file a claim with the insurance company.

While the costs of insurance fraud are offset with higher premiums, the overall cost is born by the insurance company. Millions are dollars are paid out annually for fraudulent claims. Whether PIP is replaced with BI or the no fault laws are updated, these steps are at least progress in the fight to stop fraudulent claims.