No-fault auto insurance is not only a threat to drivers’ pocket books. There’s now evidence that no-fault car insurance encourages dangerous crimes that put lives at risk.
The dangerous crime is “swoop and swat” in which fraudsters deliberately cause an accident so they can bill insurance companies for big money. The billing is done through chiropractors, massage therapists or X-ray clinics and it can be lucrative for scammers. They take advantage of a loophole in insurance policies called personal injury projection or PIP.
An insurance company might be billed $10,000 for something as simple as an X-ray or a massage via PIP, CBS News reported. One fraud ring in New York City was able to rake in $279 million.
National losses to PIP fraud might be $8 billion and up to 18% of PIP claims are possibly fraudulent, the Coalition against Insurance Fraud estimated. This raises premiums for everybody and leads to sky high insurance costs in states like Michigan. It also leads to a situation where a large percentage of the population is driving without insurance because they cannot afford coverage.
No fault is why the average Michigan resident pays $213 a month or $2,55` for car insurance while I only pay $94.99 a month in Colorado. My state legislature wisely abolished no-fault auto insurance back in 2003.
The Danger from No-Fault Insurance
The worst danger from no-fault is that it encourages staged accidents in real people can get hurt. A common tactic is to have a car full of people ram a vehicle so they can claim injuries.
Such scams are particularly despicable because they often employ poor illegal immigrants as “crash test dummies.” Many of them end suffering from real injuries from the fake crash.
An even more horrendous aspect of the scam is that many of immigrants and others take part in it to get medical care. A large percentage of them are uninsured and using fraud to pay for their healthcare.
If something goes wrong people can be killed or injured. To make matters worse it is often impossible to stop insurers from paying PIP claims. In Michigan there’s actually no limit on the amount that can be paid out.
Hope of Reform
Fortunately there is some hope of reform. The PIP fraud problem in Florida is so bad that the state legislature is actually thinking about killing off no-fault.
Legislators are talking about taking action because the problem is out of control. There were around 7,000 cases of PIP fraud in the Sunshine State in 2014 and 2015, CBS reported.
Another reason why legislators want to get rid of no-fault is a high percentage of drivers without insurance in Florida. Around 25% of the motorists ticketed in the state lacked coverage.
Disturbingly special interests including insurance companies and lawyers have banded together to protect no-fault. Some self-proclaimed immigrants’ rights activists are also making the absurd claim that opposition to no-fault is racist.
How Congress can kill the No-Fault Monster
There are two actions that Congress can take to slay the no-fault monster once and for all.
First it could use the powers granted by the Commerce Clause (Article One, Section Eight, Clause Three) of the Constitution to simply ban no-fault insurance. Since the Supreme Court ruled that the Commerce Clause gives Congress the power to regulate insurance in the Obamacare decisions that would be legal.
Second we can set up a real single payer healthcare or Medicare for all system. That would reduce medical costs and eliminate the need for PIP and no-fault in the first place. This would ensure that accident victims get the medical care they need quickly, without raising auto insurance premiums. It would also separate auto insurance from health insurance which will simplify the system and reduce expenses.
Congress’s failure to take such actions demonstrates why Americans hate Washington so much these day. Legislators refuse to take common sense actions that would help all actions.
No-fault auto insurance is a very bad idea that needs to be killed off once and for all.