State Legislatures Make Headway in Battle Against Fraud

Lawmakers in several states are trying to squeeze crash rings that bedevil auto insurers with bogus injury claims. Shady wheel deals steal billions of dollars each year. But reforms have no certainty of passage despite large public benefits, as interest group politics can poison the best proposals.

Florida, New Jersey and Michigan are three hotspots. There, staged crash rings and rogue clinics are being targeted.

Especially, several bills would whack the recruiters (also called runners) who send the gangs patients. Some of these bills tackle an emerging trend: Parasitic recruiters are badgering real crash victims for treatment at shady clinics.

This scam diversifies the old business model of stuffing a car with cronies who pretend they’re injured to soak auto insurers. Real crash victims are now cash cows as well. Consumers thus may receive substandard, inflated or unnecessary treatment at sham clinics.

Florida. The Sunshine State is ground zero for no-fault fraud in the United States. Widespread staged-crash rings are bleeding no-fault insurers. Clinics often are shams designed solely to churn out dishonest injury claims. Two-car families pay a nearly $100 fraud tax each year, the Insurance Information Institute said.

Promising anti-fraud reforms passed as part a larger no-fault bill March 10. As a result, clinics will face tighter licensing standards. Medical providers convicted of fraud could be booted from the no-fault system. And insurers will have more time to investigate claims before paying. The right of insurers to conduct examinations under oath was reaffirmed.

New Jersey. Shady no-fault clinics have sprouted around the Garden State. A proposal aims to tackle the exploitation of crash victims and stymie sleazy tactics aimed at recruiting crash victims to sham clinics. Two proposals would get rid of unwanted phone calls, knocks on doors, letters and other pushy tactics.

The temporary freezes would last for 30 days after a crash. Often-traumatized victims thus will gain time to choose the best medical and legal options without a pushy recruiter bugging them. The provisions would:

• Restrict broad solicitation of crash victims; and
• Limit access to police accident reports, which recruiters use to identify and locate crash victims.

Meanwhile, a separate auto provision unrelated to crash rings would make it a crime for drivers to illegally lower their auto premiums by lying about where they garage their vehicles.

Michigan. Two measures could help Michigan battle crash gangs. First, the governor has signed a bill making it a crime to recruit for crash rings, and for the kingpins to hire recruiters.

A second measure would create an auto fraud prevention authority. Michigan’s lack of a fraud bureau has hampered efforts to take down crash rings. The unit would fund investigations and prosecutions. Drivers would fund the unit with higher vehicle registrations.

There is a broader trend cropping up with greater frequency among states of fraudsters lassoing bona fide crash victims for fake-injury schemes. This is another way for crash gangs to diversify their illicit revenue streams. State houses are taking two counter-approaches:

• Block access to crash reports.
• Limit solicitation of victims.

Texas blocks most solicitation of any kind. Florida limits access to crash reports for 60 days. Georgia forbids reports to be used for “commercial purposes.”

But similar bills have fizzled in other states recently. Ironically, police have stymied crash report bills in several states, possibly because they are protecting revenue they earn from selling reports.

Protecting crash victims from being victimized needs far more attention, study and protective legislation. The well-being of policyholders and continued large losses for auto insurers both are on the line.