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Florida Set to Tackle PIP Auto Insurance Reform Again

Michael Adams , Claims Journal

September 16, 2011

Florida state officials, insurers, medical providers, and consumer groups are preparing to re-examine the state’s no-fault auto insurance law just months after lawmakers failed to resolve the issue.

State Insurance Consumer Advocate Robin Westcott is scheduled to hold the first of three meetings on September 15 in anticipation of submitting a report to state officials by the end of October.

A primary issue will be whether to retain and reform PIP (personal injury protection) or remove the mandated coverage and make it optional. Florida Governor Rick Scott has come out in support of removing the mandate. “In recent years, fraud has so permeated Florida’s PIP system and caused the cost of coverage to more than double in many parts of this state,” Westcott. “The initial value of such a system is now lost for many consumers as they struggle to afford this mandatory coverage.”

One insurance industry trade group, the American Insurance Association, is calling for the elimination of the mandated coverage, while another, the Property Casualty Insurers Association of America, says it is reviewing all options.

The insurance representatives serving on the work group include Allen McGlynn, representing State Farm Mutual Automobile; Robert Simmons, representing Allstate Insurance Co.; and Alex Hageli representing PCI. Also serving will be Rene Hernandez on behalf of the Florida Insurance Council and Lynne McChristian with the Insurance Informational Institute.

The rationale behind the no-fault system is that it should take care of claims under $10,000 and reduce the need to litigate. Insurers and consumers, however, are saying that unscrupulous attorneys, medical clinics and health care providers see the $10,000 as free money and once that amount is breached are free to sue the other drivers and their insurance company.

In April, the Office of Insurance Regulation released a report showing that the costs of the PIP system are rapidly rising. PIP payouts have increased from roughly $1.5 billion in 2008 to $2.5 billion in 2010. Between 2006 and 2010 the number of pending lawsuits at year end increased by 387 percent, while the number of settlements increased 315 percent. Florida’s PIP pure premium, which is the amount of premium needed to cover losses, rose by 50 percent, from just under $100 per car at the end of 2008 to over $150 in the third quarter of 2010.