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Benefits Of PIP Reform May Be One-Sided

In states requiring PIP (Personal Injury Protection) insurance coverage, fraudulent injury claims are causing for a push in reforms. Florida, for example, recently enacted limits on how much individuals could recover through their PIP policies. While the move is intended to crack down on false claims for insurance companies, it might also end up hurting the very people paying for the coverage.

For drivers in most states, PIP isn’t an issue. That’s because most states require the insurance of the driver who caused the accident to pay for the other driver’s expenses. However, some states operate under no-fault insurance laws. In these states, each driver involved in a collision submits claims to their own insurance for payment and fault never has to be determined. These states also usually limit drivers’ ability to take the other driver to court for damages.

While this approach may streamline the claims process, it also makes it easy for people to make false injury claims. They can “stage” car accidents then claim they were injured and receive money for the alleged injuries.

Florida has the highest rates of fraudulent claims among the 12 no-fault states so to combat the problem the state passed a law limiting the amount of compensation a person injured in an accident could receive. Previously, each person involved could receive up to $10,000 to cover medical bills, treatments, and other expenses. Under the new law that amount drops to $2,500 unless the person making the claim can prove the injury was an emergency and reports the injury within two weeks of the accident.

Backers of the new law claim it will reduce the number of fraud cases by reducing the potential payout. Others claim the savings will reduce premiums for drivers throughout the state.

On the other hand, consumers complain that they are paying for PIP coverage so they should receive the full compensation possible. Plus, some injuries may not become a problem until weeks after the initial accident so the reporting deadline could leave some people without the ability to make a claim at all. Furthermore, consumers don’t feel the burden of proving the injury should be on them. Since they are paying for the coverage, they shouldn’t also have to do extra work to get what they paid for.

While many groups have been selling the promise of lower premiums as the main benefit to consumers – the promise that makes the extra work bearable for some – most auto insurance companies say PIP claims actually end up costing them more money to pay out than they take in through premiums for the plans. That means those companies won’t be able to lower premiums for PIP coverage for anyone.

The question regarding reforms like those in Florida is should the consumer be burdened just to protect the insurance company? Clearly no one wants to reward fraudulent behavior but who should be responsible for making sure that doesn’t happen? Chances are good that the $2,500 payout will still be sufficient for con artists who want to be paid for nothing but the reduced coverage may end up hurting innocent drivers who paid their premiums but who end up getting stuck paying the bill for their accident-related injuries.