Car insurance fraud costs $1 billion per year and you pay the price (video story included)

The state of Florida, including the city of Miami, have suffered an increase in insurance fraud recently. A minor fender bender can cost an insurance company $40,000 if there are four people involved. You may not be involved, but it will still cost you.

For some people, South Florida is a wonderful place to live. But it is also among the ten cities with the highest rate of traffic accidents and insurance fraud, according to the National Insurance Crime Bureau.

Three years ago, Katherine Salazar had an accident. As a result, she suffered multiple injuries and spent many days in the hospital. Thankfully she had auto insurance and personal injury protection that covered part of the bill.

“I was going home on a Sunday night and I got hit by a drunk driver who ran a red light, resulting in me having a head injury,” said Salazar. “I had to go to the hospital and I had bed rest for about five days. I also had to [receive] chiropractic, and they had to pay for that too.”

Cases like this are the reason the state of Florida requires personal injury protection and property damage coverage. People need help with the high cost of medical bills and liability.

“PIP, personal injury protection, is $10,000 standard, and it covers you whether you are at fault or not,” explains Lynn Fuentes of the Insurance Exchange of America. “It is the primary coverage for a medical claim after a car accident.”

Florida is one of the states with the highest rate in PIP fraud. According to the National Insurance Crime Bureau, Miami is in third place after New York and Tampa.

“There’s nothing wrong with filing a PIP claim if you are actually injured,” said Fuentes.  “But unfortunately, what happens is that these agencies or these clinics max out your PIP claim. They pay the insured maybe a thousand, two thousand, but the people that really get paid are the one that set up the process — the accountant or tow truck driver who hooked them up.”

In February last year, Florida Chief Financial Officer Jimmy Patronis and Florida Department of Financial Services detectives arrested ten people in an elaborate insurance fraud scheme. The group submitted 23,000 fraudulent claims, totaling $42.7 million.

“People that file too many claims, PIP or not, are going to affect the loss ratio of companies in a certain zip code,” said Fuentes. “That is why sometimes people will have their premium affected even though they have no new violation.”

According to The Zebra, a car-insurance comparison site, the average cost of car insurance in Miami for a person with an accident is more than $2,000, compared to the national average price, which is $800.

Private companies can also deny you coverage based on claims affecting those who are at fault in accidents and those who aren’t.

Salazar said she’s afraid to ever file claims, so she pays out of pocket. “That’s probably why they are so tough on you with the price,” she said. “There are people faking and staging all the time … I actually have little bits of things that I would like to fix but I’m too scared to even say anything because I don’t want my insurance to go up.”

The Florida Office of Insurance Regulation says that PIP fraud costs insurers close to $1 billion annually. What can you do to help in the fight against PIP fraud? Report suspected insurance fraud to the Department of Financial Services. You may be eligible for a reward.


Maria Raudez grew up in Nicaragua and now studies broadcast journalism at Florida International University. She is passionate about women’s rights and political news and she’s a firm believer that journalism is a key to developing democracy.