Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2021

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Personal injury protection can be an important additional auto insurance coverage. In fact, some states consider this coverage so important that it’s mandatory. This means your car insurance policy HAS to have it and you HAVE to pay for it. In Texas, while PIP is technically mandatory, you can reject the coverage, in writing, as part of your application.

In some states, this mandatory coverage results in substantial insurance fraud costs, which are simply transferred directly to the consumer. Case in point: Michigan has the highest auto insurance premiums in the country. Why? They have mandatory unlimited PIP limits on every policy. Someone gets injured in a vehicle and can collect as much money as they want. Ouch!

What’s Going On in Florida?

According to the Miami Herald, “the state [FL] leads the nation in staged car accidents and questionable claims.”

As a result, a new coalition named Gear Up Florida has started a crusade to reduce this “epidemic” or insurance fraud. Their main goal is to get the Florida PIP laws changed to make it more difficult to take advantage of the system, which is bleeding citizens dry by causing insurance rate increases.

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How the Scam Works

Unscrupulous individuals stage car accidents in which several of their passengers suffer “soft tissue” bodily injury. This type of injury is tough to dispute, as there are no broken bones, and no visual proof of “actual” injury.

Basically, the perpetrators say they are hurt and in pain. Then they seek medical help from “pain clinics,” some of which are more than happy to bill an insurer for $10,000 worth of medical care…per individual! Another gray area medical service is massage therapy.

Some of the most brazen fraudsters (who got caught) have been captured by parking lot video cameras, which recorded the staged accidents taking place.

After such accidents, these individuals call a group of friends, who show up at the scene and claim to have been injured. Let’s say six people claim to have soft tissue injuries. That’s a $60,000 payout by the insurer.

Proposed Changes to the Law

The Gear Up Florida coalition is not seeking to end PIP coverage in Florida, but rather wants the following steps taken to curb the rampant fraud.

1. Give Insurers More Time – Insurers have a specific amount of time to process and pay out these types of insurance claims. State laws seek to make sure insurers aren’t dragging their feet for those who are really injured. It is thought that insurers can limit the fraud by taking more time to investigate the claims more thoroughly.

2. Limiting Attorney Fees – Attorneys can rake in big bucks by getting involved in the claims process. The idea here is if attorneys can’t make as much money dealing with PIP claims, they will be less aggressive in their pursuits of higher payouts.

3. Pain Clinic Oversight – Many pain clinics are a godsend to those who really need them to manage legitimate pain. However, there is so much easy money involved here that some pain clinics are engaging in the fraud by continuing to offer “medical” services to those who don’t need them…for a fee, of course. This includes other “alternative” medical treatment facilities.

Ultimately, there are a few bad apples out there that are costing the rest of us millions of extra insurance premium dollars on a yearly basis.

It is imperative that the loopholes get closed here and only those who need legitimate medical services benefit from this type of auto insurance coverage.

Tip: 10 ways to lower your car insurance costs.

(photo: ChazWags)