Florida drivers pay the third highest annual rates in insurance premiums at an average of $2,917 per year,¹ yet there is no simple or easily identifiable explanation for the rising insurance premiums that Floridians are paying. Some sources cast blame on a shortage of mechanics² or the rise of high-tech and electric vehicles,³ but excessive and exaggerated insurance claims and lawsuits are major contributing factors when insurers calculate premiums for consumers. Auto insurance fraud occurs in several ways, but the most recognized method is when consumers or policyholders lie or exaggerate to receive a larger claim payout after a motor vehicle accident.⁴ 

Many consumers are under the impression either that the policyholders only benefit from an auto insurance policy when they collect on an insurance claim or that an inflated or frivolous insurance claim only cuts into the insurance company’s profits.⁵ Therefore, consumers are incentivized to exaggerate their auto insurance claims or even file completely false or frivolous claims. However, in 2010, the FBI estimates that insurance fraud costs the average U.S. family $400 to $700 per year in insurance premiums,⁶ and a 2022 study estimates the amount of fraudulent claims payout to be $308.6 billion per year.⁷ Insurers have to cover the severe losses or excessive payouts, so those costs inevitably drain into the insurance premiums rated for every other driver in America.

Can we really blame our insurance companies for our rising insurance premiums? The auto insurance fraud racket is not sustained by consumers alone. According to information from insurance fraud investigations conducted by the FBI and other investigative bureaus, networks of medical professionals and attorneys use their expertise on insurers and the claims process to manipulate a claim and “by-pass anti-fraud measures” to present fraudulent claims as legitimate ones.⁸ In Florida, these actors can actually be found criminally and civilly liable for insurance fraud.⁹ A person is liable for insurance fraud if he or she presents a “written or oral statement as part of, or in support of, a claim for payment or other benefit pursuant to an insurance policy” with knowledge that the statement contains any false, incomplete, or misleading information.¹⁰ As drivers and consumers that are directly disadvantaged by these underhanded schemes, we should be pointing the finger at these fraudsters for rising premiums, but assigning blame is only the first step to leveling the premiums back out.

Insurance companies’ previous methods for digesting auto insurance relied on claims adjusters to analyze and investigate each claim,¹¹ and fraudulent claims are then passed to government entities that serve as investigative bureaus such as the Florida Chief Financial Officer Bureau of Insurance Fraud.¹² This opens the door for an overwhelmed and rushed process where fraudulent claims may be overlooked or under-appreciated. Insurance companies and investigative bureaus should turn to artificial intelligence (AI) and other technology-based methods for digesting insurance claims to evaluate and identify fraudulent claims more efficiently. 

AI services offer automated data analysis that can streamline the claims investigation process and can remove the subjective analysis by creating algorithms that constantly adjust to the task.¹³ Possible factors of fraudulent or exaggerated insurance claims include a lack of police report, a suspicious history of claims, high volume clinics, or extensive medical bills, etc.,¹⁴ and these factors could be easily identified through AI pattern detection. Insurance companies would greatly benefit from an AI software that incorporates predictive behavioral analytics and biometrics, which would expedite the claims investigation process by analyzing patterns and identifying outliers or anomalies.¹⁵ Several companies like Salesforce, SHIFT, Hitachi Solutions, Friss, and IBM have developed systems specially tailored for fraud detection through artificial intelligence and machine learning. 

Auto insurance fraud is a terrible crime that often goes undetected and unpunished. We cannot continue to tolerate these fraudsters driving up insurance rates at the cost of average Americans. Through AI software, insurance companies should expedite and improve their claims investigation process to balance out the auto insurance premiums.   

References:

¹ Kate Gibson, Car insurance premiums around the U.S. are soaring. Here’s why. CBS News (Jan. 12, 2024, 5:00 AM), https://www.cbsnews.com/news/car-insurance-rates-inflation-costs/.

2 Gibson, supra note 1.

3 Chris Kissell, Why Did My Car Insurance Rates Go Up In 2024? FORBES Advisor (Mar. 12, 2024, 5:10 AM), https://www.forbes.com/advisor/car-insurance/why-is-my-car-insurance-so-high/.

4 AJ Dellinger, 6 Types of car insurance fraud, Bankrate (Mar. 21, 2024), https://www.bankrate.com/insurance/car/fraud.

5 Robert W. Emerson, Insurance Claims Fraud Problems and Remedies, 46 U. Mia. L. Rev. 907, 912-13 (1992).

6 Insurance Fraud, Federal Bureau of Investigation (Mar.17, 2010), https://www.fbi.gov/stats-services/publications/insurance-fraud

7 Insurance Fraud & Scams, My Florida Chief Financial Officer, https://www.myfloridacfo.com/division/ica/fraudandscams (last visited Mar. 24, 2024).

8 Investigating Insurance Fraud: A $30-Billion-a-Year Racket, Federal Bureau of Investigation (Jan. 31, 2012), https://www.fbi.gov/news/stories/investigating-insurance-fraud.

9 Fla. Stat. § 817.234.

¹⁰ State v. Delprete, 331 So. 3d 174, 177 (Fla. 4th Dist. Ct. App. 2021).

¹¹ Investigation: A Critical Step for Claims, The National Alliance for Insurance Education & Research (May 22, 2023), https://www.scic.com/investigation-a-critical-step-for-claims/.

¹² Investigation and Forensic Services: Bureau of Insurance Fraud, My Florida Chief Financial Officer, https://www.myfloridacfo.com/division/difs/insurance-fraud (last visited Mar. 14, 2024).

¹³ Jonathan Yundt, Artificial Intelligence’s Crucial Role in the Future of Insurance Claims, Hitachi Solutions, https://global.hitachi-solutions.com/blog/insurance-claims-ai/#:~:text=AI%20can%20also%20identify%20patterns,experience%2C%20providing%20faster%20claim%20settlements (last visited Feb. 16, 2024).