While state officials are widely praising Florida’s new no-fault auto insurance law, insurers are wary of having to implement rate decreases before there is a corresponding drop in losses as the new law stipulates.
The new law specifies that by Oct. 1, every auto insurer must submit a rate filing with the state’s Office of Insurance Regulation (OIR) that either reflects a 10 percent decrease in the personal injury protection (PIP) portion or gives a detailed actuarial reason why it is unable to do so.
Then next January, insurers will be required to file for 25 percent reductions in PIP rates, or again explain why not.
Florida Insurance Council Vice President Sam Miller said that insurers are already contemplating how the new PIP law will affect their rates. He said that while the rate language concerns insurers, insurers are hoping that the fact that it is not a mandate means that the rate decreases will be based on loss numbers and not political matters.
“Companies are concerned that rates will be rolled back before there are corresponding losses,” said Miller. “But we expect the law to operate on actuarial data and that the OIR [Office of Insurance Regulation] will administer it fairly.”
Much has been made of the fact that the bill doesn’t mandate the rate decreases and gives insurers freedom in deciding whether to actually lower rates. But OIR officials say they are going to insist on data to back up any insurer’s decision and will enforce established rate requirements.
State regulators still have the authority to ensure that rate changes are actuarially justified and not “excessive, inadequate, or unfairly discriminatory,” according to OIR spokesperson Amy Bogner.
“The legislation would not change our current duties and responsibilities,” Bogner said.
Also, the new PIP law requires an independent actuarial firm to report to Gov. Rock Scott and other officials on the law’s expected impact on PIP losses. That study is due to be submitted two weeks before the Oct. 1 rate filing deadline.
Reforming the PIP law was the number one insurance priority of state officials and lawmakers this year. For years, critics have said the insurance scheme, which provides drivers with $10,000 of coverage, is rife with fraud and loopholes that encourage excessive litigation and drive up medical costs.
Despite widespread criticism of the PIP system, the reform bill nearly did not make it. It passed by a one-vote margin in the Senate in the final hour of the legislative session. It is designed to reign in medical benefits, change attorneys’ fees and reduce fraud.
On the whole, the rest of the PIP bill is favorable to insurers and contains much of what they wanted, although it lacks one of their priorities: a cap on attorneys’ fees.
The reform law gives accident victims only 14 days to seek treatment and provides $10,000 in benefits in acute cases and $2,500 for non-acute conditions. Only licensed medical physicians and certain specialties must provide medical treatment and massage therapists and acupuncturist are no longer by PIP.
Even though it does not cap attorneys’ fees, the bill does end the use of contingency multipliers and allows insures to examine claimants under oath. It also gives law enforcement and regulators more tools to fight fraud.
Robin Westcott, the state’s insurance consumer advocate, said that given the overall strength of the bill it is hard to imagine that any insurer could explain away not lowering rates.
“This is a meaningful bill and it should result in significant rate reform,” said Westcott.
The period between now and October gives politicians time to put pressure on the insurers to offer at least some form of rate relief.
After the session, Scott said, “This is a bill that delivers on my promise to reduce the cost of living in this state by reducing fraud, stopping the growing cost related to accident fraud and ultimately saving Floridians money.”