COLUMBIA, S.C.--Following a new study by the Insurance Research Council (IRC) which found that auto injury claims in four No Fault states have escalated at dramatically different rates, ISO has identified three key areas where software can help reduce the dramatic rise in No Fault auto insurance claims costs.
According to ISO, companies should examine procedures to combat the massive increase in fraud, control spiraling personal injury protection (PIP) costs, and determine thresholds to control payments.
The IRC report, entitled Analysis of Auto Injury Insurance Claims in Four No-Fault States, found that from 1997 to 2002 average claims increased by 122 percent in Colorado, 60 percent in New York, 37 percent in Florida and just 2 percent in Michigan, which also had fewer claims per number of insured drivers.
Types of treatment and medical charges varied dramatically from state to state. The report highlighted injury thresholds, which varied from a monetary threshold of at least $2,500 of medical expenses in Colorado, to a strict verbal threshold in Michigan that restricts bodily injury claims to injuries that lead to permanent serious disfigurement, serious impairment of a bodily function, or death.
"The variations in the No Fault state costs show just how much the industry as a whole still has to gain by adopting new procedures," said Lee Fogle, vice president of ISO. "Using the power of new software technology that is now available to address these three critical areas, organizations can substantially reduce the estimated $6.3 billion annual cost of auto insurance fraud nationwide."
At present, 12 states have No Fault insurance, and though Colorado repealed its No Fault insurance in July 2003 and reverted to a tort system, it still has a backlog of claims to settle.
The statistics are alarming in states that do not have No Fault Insurance. According to Bob Nuemann, director of the Florida Department of Insurance Fraud Division, more than 80 percent of PIP claims in Miami are fraudulent. A report on Bankrate.com shows the frequency of claims in New York is 20 percent higher than the national average, and the state's severity of claims is 130 percent higher.
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