Lawmakers Considering Fla. Car Insurance Reform

Some lawmakers are considering a push for another round of reforms for the Florida auto insurance market, and, according to the Florida News Service, they might be more successful this time around with larger conservative majorities in the state legislature.

With one of the highest averages in the nation for no-fault claim sizes, Florida’s coverage environment has been said to be rife with fraud and abuse, pushing the cost of policies higher and higher.

According to 2008 data for the National Association of Insurance Commissioners, the Sunshine State had the fourth highest average expenditure on coverage in the nation that year — $1,055.

And a new report from the Insurance Information Institute (III) asserts that a portion of that high cost of coverage could be considered a “fraud tax” because of the practice’s direct negative effect on prices.

According to the III, “staged auto accidents and excessive and often unnecessary medical treatment are adding around $1 billion to the costs of Florida’s no-fault auto insurance system.”

Florida Insurance Fraud Graph

Click graph to enlarge

That amounts to an extra $100 in costs for the typical two-car family, the III says.

And those costs may continue to rise as the price tags of no-fault claims grow.

The average no-fault claim has been ballooning in recent years, with the average today coming in at nearly 24 percent higher than in 2006. Back then it was $6,344; today it’s $7,847.

The III has said one problem is that auto insurance companies in Florida are required to provide policies with at least up to $10,000 in personal injury protection — which pays out to the policyholder for his or her medical expenses from an accident — and that $10,000 has become a “dollar target” for expenses.

This has been a problem for many no-fault states.

States with this type of system — there are 12 total — require drivers to get coverage that pays the policyholder directly for his or her damages, rather than paying for damages that the at-fault driver has caused to a third party, which is the case in states with tort-based systems.

A more strict fee schedule for personal injury protection was implemented in 2007 that provided some temporary relief, but the III reports that the positive results soon faded.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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