THE
CAPITAL, TALLAHASSEE, August 21, 2012..........A much
heralded change to Florida's no-fault automobile
insurance law likely won't reduce policyholder premiums
but may slow the increase in rates, according to a
report released Tuesday by state regulators.
The Office of Insurance Regulation released findings
from an analysis of HB 119, passed by lawmakers earlier
this year. The new law attempts to reduce costs
associated with personal injury protection insurance, or
PIP, which provides up to $10,000 in medical coverage
regardless of who caused an accident.
The report says the new law, which places restrictions
on benefits and makes efforts to curb fraud, is expected
to translate into a reduced losses of between 14 and
24.6 percent in the PIP portion of a typical automobile
insurance policy. The PIP portion accounts for about 20
percent of policy costs.
Such reduced losses, however, may not translate into
lower automobile insurance premiums because PIP rates
are currently inadequate to pay losses and most of the
provisions won't go into effect for months.
Still, insurance regulators and the state's insurance
consumer watchdog praised the legislation, the benefits
of which may not be known for a few years.
“Only time will tell whether the actual savings in PIP
loss costs will exceed the estimated savings, but we are
optimistic that reforms enacted by the 2012 Florida
Legislature will have significant, favorable results for
Florida consumers,” said Robin Westcott, Florida
insurance consumer advocate.
Lawmakers earlier this year passed the insurance
industry-backed measure to stem skyrocketing claims paid
under PIP. Between 2006 and 2010, PIP losses increased
by 66 percent to $2.5 billion, while the number of
claims rose by 28 percent, according to the analysis
conducted by Pinnacle Actuarial Resources Inc.
"The savings shown assume that current rates are
adequate," the report noted. "To the extent that current
PIP rates are inadequate, it is likely that insurers
will offset the savings from HB 119 against the
otherwise indicated PIP rates."
By Oct.1, PIP insurers must submit rate filings to the
Office of Insurance Regulation with at least a 10
percent rate reduction, or document why they can't.
Consumers may not see immediate premium benefits because
many of the bill's major changes won't kick in until
after carriers are required to file for new rates. Most
of the law's provisions take effect Jan. 1.
"While the 2012 PIP legislation delivered the potential
to address the fraud and abuse in the PIP system,
policymakers, regulators and Florida drivers need to
understand that the new PIP law must have adequate time
to be implemented and take effect so the new PIP law can
achieve its potential," said Donovan Brown,
representative of the Property Casualty Insurers
Association of America.
Among its major provisions, the law requires clinics
treating PIP patients to be licensed, limits payment to
chiropractors and prohibits massage therapists and
acupuncturists from being reimbursed under the program.
PIP claims must also be reported within 14 days of an
accident.
Westcott said the proposed reductions in losses may be
conservative.
"It is important to note that historically, past
legislative reforms of the workers’ compensation and
medical malpractice systems required independent
actuarial studies that significantly under-estimated the
reduction in loss costs that were actually realized,"
Westcott said in a statement."
Meanwhile, Florida Chief Financial Officer Jeff Atwater,
said analysis results were encouraging and hoped that
policyholders would see some relief.
“I am eager to see these projected savings, if not more
significant savings, passed on to Florida’s insurance
consumers," Atwater said in a statement. "Florida’s
drivers deserve to see the full impact of these policy
changes through lower auto insurance rates.”