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."
“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.