Fitch Ratings: Florida’s PIP Reform Law a ‘Credit Positive’ for P/C Insurers

New laws designed to reduce loss cost volatility and claims fraud in the Florida no-fault auto insurance system, commonly referred to as PIP, would be a credit positive for property/casualty insurers, according to Fitch Ratings.

The ratings agency said Florida has generated the fifth worst direct underwriting results of all U.S. states in private passenger automobile insurance over the five-year period 2008-2012.

Full effect of the new laws will not be felt until the middle of 2014 when PIP prices are required to decrease by 25 percent and initial implementation will have some seasoning, Fitch said. Still, some industry participants have reported seeing a reduction in the cost of some claims, according to the ratings agency.

The legislation was designed to target the abuse in Florida PIP, which has been estimated as high as $1 billion a year. Major changes in response to this law include requirements that: accident victims must begin receiving treatment within 14 days of injury; available benefit payments of $10,000 per claimant are only available for medical emergencies and are $2,500 otherwise; and that acupuncture and massage therapy are no longer considered payable sources of treatment. The law also increased penalties for fraud and set limits on attorney fees.

Florida is the third largest state for private passenger auto insurance based on direct written premiums. The largest five writers in Florida account for over 60 percent of the market and include National Indemnity Company (Fitch Insurer Financial Strength Rating [IFS] of ‘AA+’) with a 17 percent market share, State Farm Mutual Insurance (not rated) with 16 percent, Progressive Insurance Group (IFS of ‘AA’) with 13 percent, Allstate Insurance Group (IFS of ‘A+’) with 11 percent, and United Services Automobile Association (IFS of ‘AAA’) with 5 percent.

Recently, Florida State Rep. Carlos Trujillo filed two measures (HB 267 and HB 269) making bodily injury coverage a replacement for no-fault auto insurance. Fitch said it will continue to monitor developments related to the Florida PIP market to determine what impact, if any, it could have on ratings.

Source: Fitch Ratings

Topics Florida Carriers Legislation Property Casualty