Rampant Fraud in Florida or Large Insurers Taking Advantage of Consumers?
Lawmakers and insurance companies have frequently cited rampant fraud and excessive litigation as a cause for the rapidly increasing property insurance costs pushed onto consumers. As lawmakers are reconvening for a special session to address the ongoing property insurance crisis, the Florida Office of Insurance Regulation has an additional request for lawmakers. The Office is requesting an additional $6.5 million to fund a public education campaign on fraud and salaries for additional employees for fraud detection.
Interestingly, in 2021, only 1,700 fraud tips were received by the Office and from those tips only 14 individuals were convicted. This is a less than one-percent success rate and a one-percent report rate of the 116,000 insurance claims made throughout the state last year. The Office has cited the difficulty of proving fraud as the reason for the poor success rate. Property insurance issues have been prevalent in Florida since Hurricane Andrew wiped out a large portion of Miami-Dade County in 1992, but the sudden increase in rates and drop in insurers have only begun to occur within the past five years. The past five years have also only resulted in 148 convictions of property insurance frauds, resulting in about 29 convictions per year out of the hundreds of thousands of claims filed. Moreover, it appears there is a higher rate of successful auto insurance fraud convictions and reports yearly.
Regardless of the low statistics, insurers continue to state the difficulty of proving fraud and high litigation costs are to blame for the rising costs. Although denial statistics are difficult to find, nearly 48% of Hurricane Irma claims were denied by property insurers. Louisiana, in an effort to prevent insurers from denying claims in bad faith, enacted new laws in 2021 specifically designed to protect homeowners. These laws require insurers to provide written explanations of depreciation, a prohibition on requiring homeowners to use insurance company vendors, and a mandatory inclusion of contractor overhead and profit into loss calculations.
Perhaps Florida should review Louisiana's recent changes and acknowledge that fraud is a miniscule contributor to increasing policy costs and high litigation costs may be a result of wrongful denials from insurance companies.
This article is not intended to be legal advice nor create an attorney-client relationship.