Report Finds Florida PIP Reforms Helping to Lower Rates

Florida drivers are starting to see the benefits of a 2012 re-write of the state’s no-fault automobile insurance law as insurers have reduced their personal injury protection (PIP) rates by a statewide average 13.2 percent.

Since PIP rates only account for roughly 25 percent of a policyholder’s premium, the 13.2 percent rate decrease translates into an overall reduction in premiums of just three to four percent.

The state’s Office of Insurance Regulation released a preliminary analysis of the rate levels of the top 20 auto insurers that account for more than 75 percent of the auto insurance market.

The OIR said that the findings strongly suggest that the reforms are working.

“The estimated average statewide savings reflect a positive trend in comparison to 2011, when 86 percent of auto filings were for proposed increases in PIP premiums, the vast majority for double digit increases,” the report stated.

Reforms required individuals injured in an automobile accident seek medical attention with 14 days. Medical coverage was limited to $10,000 for emergency treatment and $2,500 for non-emergency treatment. Lawmakers also enacted guidelines to reduce legal costs and numerous anti-fraud provisions.

The reforms required insurers to submit rate filings to the OIR on October 1, 2012 and January 1, 2014. Cumulatively, the two rate filings were expected to reflect a drop in PIP rates of 25 percent or the insurer must show why it could not meet that goal.

Out of the top 20 insurers, 14 lowered their PIP rates, with seven insurers dropping rates by 25 percent or more. Ten insurers’ rates were in line with a Pinnacle Actuarial Resources study conducted last year that projected rates should fall between 14 percent and 24.6 percent.

Progressive Select Insurance Co. reported the largest rate decrease with a 34.6 reduction in PIP rates that translated into a 15 percent overall reduction. Progressive American Insurance reported similar numbers at decreases of 32.3 percent in PIP rates.

Several insurers, however, reported significant reductions in PIP rates that resulted in only minor changes in their overall rates.

Geico General Insurance Co., the state’s largest auto insurer, reported a 25 percent reduction in its PIP rates, which translated into only a 0.6 reduction in its overall rate. The same trend held true for other major insurers such as Government Employees Insurance Co., Allstate Insurance Co., United Services Automobile Association and USAA Casualty Insurance Co.

Florida Association of Independent Agents President Jeff Grady said he is not surprised that the overall rates have not declined more.

“There is a tendency to pass reforms and then want the rate decreases tomorrow,” said Grady. “But a lot of companies are still trying to play catch up.”

One reason that rates may not have declined as much as some hope is the uncertainty that has surrounded the law.

Last year, a group of acupuncturist and massage therapists who were eliminated as PIP medical providers under the reforms, succeeded in convincing a circuit court judge to issue an injunction against the law.

The medical providers challenged the constitutionality of the law on the grounds it impinges on accident victims’ access to the courts.

The First DCA later lifted the injunction, ruling in the case [McCarty v. First DCA 13-355] that the medical providers did not have standing to bring forward the suit, saying such a suit could only be brought forward by actual accident victims. In so doing, the circuit court left open the possibility of further challenges by accident victims and attorneys.

The OIR’s latest report, along with the First DCA’s lifting of the injunction and subsequent refusal to hear any appeals, could affect some lawmakers’ outlook on further PIP reforms.

Senate Banking and Insurance Committee Chair David Simmons (R-Altamonte Springs) has aggressively questioned whether PIP is still viable given the legal challenges and other stumbling blocks.

“We’re going to look at this again because we’ve got no answers from the First DCA,” said Simmons at a November committee meeting. “They, by some accounts, gave us a roadmap that we better do something.”

A draft bill circulated by Simmons would eliminate PIP in favor of requiring every driver to cover bodily injury coverage of a minimum coverage of $25,000 per person and $50,000 for injuries to multiple accident victims.

State regulators said that 92 percent of Florida drivers currently are insured for bodily injury coverage with 62.8 percent with coverage limits of $25,000/$50,000.

Given the latest rate news and legal rulings, however, many in the industry say that now may not be the time for lawmakers to act.

Donovan Brown, state government relations counsel, Property Casualty Insurers of America (PCI), said now may be the time to leave the reforms intact.

“It’s tough to speculate what lawmakers might do,” said Brown. “But the prevailing feeling in the industry is to now allow the reforms to be fully implemented and see what their impact is on the market.”