Insurers Show Cautious Openness on Florida PIP Repeal

Insurers are cautious but open about a proposal in Florida to ditch the state’s no-fault auto insurance system in lieu of requiring bodily injury coverage where injured motorists would have to file claims with other drivers’ insurers to get crash-related medical expenses covered.

The latest proposal comes nearly a year after an expansive auto insurance reform package, HB 119, was signed into law, which Gov. Rick Scott said would reduce fraud under the personal injury protection (PIP) coverage required under the no-fault law that has driven up costs for Florida motorists.

PIP coverage awards up to $10,000 for medical bills and lost wages to injured drivers, regardless of whether they caused the crash or not.

Sen. David Simmons (R-Altamonte Springs) brought his proposal Tuesday to the Senate Banking and Insurance Committee in a draft of a yet-to-be-named bill establishing a system where a minimum of $50,000 worth of bodily injury liability per accident would be required, while PIP would no longer be required.

Insurers ‘Warming Up to This Idea’

The committee hearing brought together insurers, lawyers and other stakeholders who had been participants in crafting the legislative reform package last summer to comment on abandoning no-fault requirements.

The Property Casualty Insurers Association of America (PCI), a national trade organization, said in a statement that it was supportive of dialogue on addressing the state’s “rampant fraud and abuse.”

However, PCI’s statement stopped short of support for Simmons’s bill itself, only saying that the organization found it “vital” to “engage in deliberative and thorough discussion in order to properly address auto insurance cost drivers.”

Insurers at the committee meeting took a similar route, with Michael Carlson, executive director of the Personal Insurance Federation of Florida (PIFF), saying that his state industry organization, which represents insurers with about 45 percent of the market, is “warming up to this idea.”

PIFF would like to see lower levels of required bodily injury coverage—around the $10,000 to $20,000 range—than what was proposed by Simmons, according to Carlson. Negotiations over those limits will be crucial to get support from the industry, he said.

“Let us do our due diligence,” he said. “Let the [Florida Office of Insurance Regulation (FOIR)] perform its role as the regulator. Let the marketplace speak. And let consumers make decisions so we can determine what the right price points need to be.”

Pressing Carlson for a specific answer, Simmons asked: “You’re saying that you guys would like to go ahead and see mandatory BI?”

“We’d like to see the details, chairman, but we’re very receptive to it,” Carlson said. “Right now, I can’t say that we’re supportive until we know the final bill.”

Tim Meenan, a lobbyist representing insurer Nationwide and its approximately 250,000 Florida drivers, echoed the sentiment, saying that “as with PIFF, after working out the details, we could look favorably on that.”

Impact of PIP Reforms Varies

HB 119 introduced a range of reforms to PIP coverage, including lowering the maximum amount awarded for nonemergency injuries, setting a two-week timetable for PIP-eligible drivers to get treatment for injuries and removing massage and acupuncture therapy from eligibility for PIP benefits.

PIP premiums make up about a fifth of all premiums for Florida auto insurance, according to the Insurance Information Institute (III).

A little more than half of the 135 filings approved with the implemented reforms “resulted in decreases” in PIP premiums, according to the FOIR’s latest estimates. Seventy-two percent resulted in “decreases or no changes.”

When looking at the top 25 Florida companies in the state’s auto insurance market, regulators also found 42 percent of those insurers saw a decrease of at least 10 percent in PIP premiums.

But the FOIR also found that, within the same 25 insurers, seven filings representing a quarter of the market saw PIP premium increases.

Court Decision Puts Constitutionality of Reforms at Issue

The committee hearing came weeks after Leon County Circuit Court Judge Terry Lewis granted an injunction against the reforms. Medical groups that included massage therapists sought the injunction, alleging that reforms violated their constitutional rights by removing them from PIP eligibility.

The FOIR immediately filed an appeal, but insurers say the injunction has done irrevocable damage to the public’s opinion of whether or not the reforms will be able to show their impact.

“PCI believes that the recent issuance of a temporary injunction against these PIP reforms has kneecapped the law’s full potential,” the trade organization said in a statement.

Carlson also said PIFF wished to see the full rollout of reforms without “court challenges.”

Paul Jess, general counsel for the Florida Justice Association (FJA), said that FJA predicted a “flood of litigation” by this summer when HB 119 was being constructed last year.

Lewis’s ruling confirmed that prediction, Jess said, “except that the time frame will move up.”

FJA supports Simmons’s proposal as is, according to Jess, because “this new PIP is just simply unsustainable.”

“I would suggest … that Florida move into the mainstream of the states in this country that require mandatory bodily injury liability insurance,” Jess said.

Simmons said the court case should create urgency for a fallback plan should the injunction be upheld.

“We don’t know whether or not the temporary injunction that has been issued by the circuit judge will ultimately be sustained on appeal and what the effect of it is,” he said. “But it’s time for us, I believe, to revisit this issue.”

More to Come as FOIR Estimates Impact of System Switch

Sandra Starnes, director of Property and Casualty Product Review for FOIR, said that cost-savings estimates compiled by regulators found that switching the auto coverage systems would mean “decreases across all regions we looked at” for nonstandard car insurers.

Standard car insurers would see decreases in regions “where PIP fraud was prevalent,” she said.

A report from the National Insurance Crime Bureau (NICB) found that suspicious insurance claims had increased between 2010 and 2012 and were centered on Palm Beach, Broward and Miami-Dade counties in South Florida.

Lawmakers will continue their discussion about Simmons’s proposal at the next committee hearing, which will include talk about the “interplay” of PIP coverage and President Barack Obama’s Affordable Care Act.

However, with the legislative session ending in early May, whether or not a vote can bring the proposal to full legislative fruition is still up in the air.

The current PIP setup received little support in testimony at the hearing, with insurers and representatives typically lauding lawmakers for their extensive work on reforms while admitting the drawbacks of the state’s no-fault laws.

Simmons said he conferred with fellow committee member Sen. Joe Negron (R-Stuart), who championed the HB 119 reform bill through the Senate last year, as he crafted his own proposal to nix the no-fault system.

Simmons often marked his statements during the committee hearing with humorous frustration with the current auto insurance system that lawmakers have grappled with time after time.

“[PIP] is something that the Legislature has dealt with every four or five years,” he said, going on to say “next time, ain’t gonna be any next time,” borrowing a line from “Love the Way You Lie,” a song from rapper Eminem and pop star Rihanna.

Before the meeting adjourned, Simmons also offered fellow lawmakers an aside to guide them through the many acronyms presented by FOIR: “PIP is BO, BI is different.”

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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