A new study from the Insurance Research Council (IRC) estimates that claim fraud and buildup added between $5.6 billion and $7.7 billion in excess payments to auto injury claims.
The excess payments represented between 13 percent and 17 percent of total payments under the five main private passenger auto injury coverages; and although the numbers are from a study conducted in the United States in 2012, they do illustrate that auto injury fraud is not just a problem plaguing the Ontario market.
“The costs associated with auto injury claim abuse make auto insurance more expensive for everyone,” said Elizabeth Sprinkel, senior vice president of the IRC. “Efforts to lower insurance costs must include measures aimed at reducing the amount of fraud and buildup in the system.”
Twenty-one percent of bodily injury (BI) claims and 18 percent of personal injury protection (PIP) claims closed with payment had the appearance of fraud and/or buildup in 2012, according to file reviewers.
The most common type of abuse was claim buildup, defined as the inflation of otherwise legitimate claims; claims with appearance of buildup accounted for 15 percent of dollars paid for BI and PIP claims in 2012. Claims with the appearance of fraud and/or buildup were more likely than other claims to involve chiropractic treatment, physical therapy, alternative medicine, and the use of pain clinics.
The prevalence of apparent fraud and buildup varied widely among states, especially no-fault states. States with highest rates of fraud and buildup among PIP claims included:
• Florida (31 per cent)
• New York (24 per cent)
• Massachusetts (22 per cent)
• Minnesota (22 per cent)
The report details several claim handling techniques used by insurers to identify and investigate claim abuse, such as independent medical exams, peer medical reviews, and special investigative units. However, the additional costs associated with these efforts to fight fraud and buildup is not included in the IRC estimates of excess payments.
The study,
Fraud and Buildup in Auto Injury Insurance Claims, is based on continuing IRC research into the causes of increased auto injury claim severity. It is based on more than 35,000 auto injury claims closed with payment under the five principal private passenger coverages.
Twelve insurers, representing 52 percent of the private passenger auto insurance market in the United States, participated in the study.
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