Florida PIP Report Shows Reduction in Rates and Fraud

Florida’s attempt to lower the cost of personal injury protection (PIP) automobile coverage is progressing as insurers’ rates have declined due in part to lower losses and fewer fraudulent claims.

The Florida Office of Insurance Regulation released an annual report to the state legislature on PIP insurance, which was the subject of a reform effort in 2012. Those reforms required individuals injured in an automobile accident to seek medical treatment within two weeks. Medical benefits were also bifurcated so individuals needing emergency care were provided with $10,000 in coverage, whereas benefits for non-emergency care were capped at $2,500.

Lawmakers also enacted guidelines designed to reduce legal costs and lower the number of fraudulent claims.

The current report is based on information provided by 35 insurers, which represented 83.5 percent of the market. It also includes the rate changes of the top 25 insurers providing PIP coverage in the state, which make up 80.9 percent of the market.

Regulators, however, noted two caveats that affect the analysis of the reforms.

First is the fact that a legal injunction was in place between March 30, 2013 and October 23, 2013 that blocked a provision regarding some medical payments. That injunction was based on a complaint that the PIP law was unfair since acupuncturists and massage therapists were excluded as PIP medical providers. Chiropractors also said the reduction in benefits for non-emergency medical treatments placed unfair limits on the treatment they could provide injured drivers.

A circuit court judge initially ruled in favor of the medical providers, but another circuit court judge overturned the ruling saying the medical providers had no standing to pursue the case. That, however, leaves open the possibility that an accident victim could pursue the matter.

Regulators noted that during the seven-month injunction, insurers were inconsistent in how they handle those claims.

“Since the current data call only contains the first 18 months of information subsequent to the effective date of its major cost savings provisions and at least seven of those are potentially distorted by the injunction, conclusions from this data call should be regarded as tentative pending more definitive data,” notes the report.

The second caveat notes that the law did include a provision allowing insurers to implement some law provisions without noting them in a policy form. Some insurers, however, waited until the law required those provisions to be included in a policy.

Even with those caveats, the report shows a vast improvement in PIP costs, which were once so high that state lawmakers briefly repealed the law.

Rates Drop

Looking at rates, PIP rates as a whole and per individual insurers have dropped significantly. PIP coverage is just one part of an individual’s total automobile insurance premium.

Before the reforms the statewide average rate changes for PIP coverage was plus 46.3, liability coverage including PIP plus 20.9 percent and overall coverage 12.9 percent.

Post-reform, the statewide average on PIP coverage dropped to minus 13.6 percent, liability including PIP to 0.5 percent and overall coverage 0.1 percent.

However, the actual statewide averages for individual insurers varied from minus 32.3 percent to a high of 40.6 percent. The report noted that some insurers needed increases due to inadequate rates.

“At the time of the implementation of the bill, there were many insurers that had residual rate need in PIP, which were used to offset some of the expected savings of the bill,” noted the report.

That trend can be seen in the rates of the state’s largest insurer State Farm Mutual Auto Insurance. Since January 1, 2011, before the reforms, State Farm’s PIP rates went up 62.5 percent. Post-reforms, however, its PIP rates dropped by 1.6 percent.

Other insurers, however, showed a much greater reduction in PIP costs during the same time period.

Geico General Insurance, the state’s second largest insurer, filed for a 50.6 percent increase in PIP cost pre-reforms. After the reforms, however, the insurer dropped rates by 25 percent.

Other top insurers with significant decreases in PIP rates include Government Employees Insurance at minus 25 percent, Geico Indemnity at minus 25.1 percent and Progressive American and Progressive Select at minus 32.3 percent and 27.9 percent, respectively.

Regulators calculated that the average PIP payment per driver has dropped from $185 pre-reform to $125.

“While there is limited data to determine the true impact of the reforms at this time, it is safe to say that the bill significantly impacted the personal auto market and changed the trajectory of the trends seen prior to the bill,” stated the report.

One area of improvement is the reduction in PIP fraud, which the state’s Department of Fraud estimated declined by 16 percent between Fiscal-Year 2011-2012 and Fiscal-Year 2013-2014.

That percentage is partially being driven by the reduction in staged accidents, which the National Insurance Crime Bureau reported drop almost 54 percent between 2012 and 2013. Between 2010 and 2013, the NCIB stated the number of staged accidents declined from 859 to 328.

The state’s major cities including Tampa, Miami and Orlando all saw decreases in the fraudulent activity.