A bill that would ditch the state’s no-fault auto insurance system will go before its first Senate committee Tuesday.
The no-fault law requires drivers to carry $10,000 in personal injury protection, or PIP, to pay for medical coverage after an accident. The coverage pays out regardless of which party is responsible for an accident.
SB 54, sponsored by Sen. Danny Burgess, would eliminate PIP coverage in favor of bodily injury liability coverage, which would pay out up to $25,000 for a crash-related injury or death, or up to $50,000 for injury or death in a crash involving two or more people.
The $10,000 financial responsibly requirement for property damage would stick around.
Similar bills have been floated in the Legislature for the better part of a decade. In the 2020 Legislative Session, a PIP repeal bill made it to the House floor, but a bill filed by Burgess’ predecessor in SD 20, former Sen. Tom Lee, stalled out in committee.
Proponents have pitched PIP repeal as a way to lower car insurance rates, arguing that the system is rife with fraud — the state Office of Insurance Regulation says that while PIP represents about 2% of Florida’s collected insurance premium, it accounts for nearly 50% of fraud referrals.
Florida does have among the highest auto insurance rates in the country, with an average annual premium clocking in at $2,309 in 2020, according to an analysis produced The Zebra, an insurance comparison site. Also, Florida premiums increased by nearly 70% between 2011 and 2019, second only to Colorado at 86%.
However, PIP isn’t necessarily to blame for skyrocketing premiums.
Colorado repealed its no-fault law in 2003, replacing it bodily injury. While rates fell in years immediately following the repeal, the trend rapidly reversed.
Opponents stress that scrapping PIP coverage won’t wipe out the need for medical care after an accident but will instead shift the burden to other coverages included in an auto insurance policy or, failing that, health insurance.
That could be a greater threat to Florida premiums than other states that have shifted away from PIP.
According to the Insurance Research Council, nearly 13% of motorists were uninsured in 2014. In 2015, the most recent IRC study, Florida had the highest uninsured rate in the country at 26.7%, more than double the national average. Four in five uninsured motorists told IRC they were going without because of high premium costs.
The costs of uninsured drivers are passed along through uninsured motorist’s coverage — so, the more uninsured drivers on the road, the higher premiums climb. Likewise, nearly one in seven Floridians do not have health insurance, and their treatment would shift costs to hospitals and emergency rooms.
A 2016 study commissioned by OIR on the effects of 2012’s PIP reform package also included estimates on how a hypothetical PIP repeal would impact premiums. The Pinnacle Actuarial Resources study estimated a $536 million negative impact to the health care system.
The study estimated a PIP repeal would save policyholders 8.1% in liability coverage rates, but only 5.6% overall, as exposure shifts to lines including medical insurance.
Conversely, a 2018 study conducted for the Property Casualty Insurers Association of America assumed that a PIP repeal would lead more drivers to purchase underinsured and uninsured motorist coverage, leading to a 5.3% rate increase, which equated to about $67 a year at the time.
For motorists who opted for full coverage, the increase was estimated at 7.3%, or $150 a year; and the increase for those who buy only mandatory coverage was pegged at 72%, or $340, on average.
A new analysis produced for the Florida Justice Association and provided to Florida Politics estimates a 2021 PIP repeal would shave 36.2% off premiums, or about $349 per car. However, the report heavily relies on a 5-year-old Pinnacle report that estimated a 9.6% savings.
The author, Stephen Alexander, attributes the 25% gap to the Pinnacle report not fully accounting for PIP fraud rates, but the report is vague on how that figure was derived.
Burgess’ bill also includes provisions aimed at curbing “bad faith” claims, such as when an insurer denies a claim without a valid reason, unnecessarily delays a settlement, or offers less than the policy coverage amount.
Bad faith reform is something of an olive branch to insurance companies though, as written, the framework included in SB 54 is minimal.
Still, it is already a point of contention. Ahead of the bill’s first hearing, Lauderhill Democratic Sen. Perry Thurston has filed an amendment that would strip the reforms from the bill.
The bill appears to have the support of Senate President Wilton Simpson, who has decried PIP coverage “outdated ” and said “it’s the right time for Florida to move to mandatory coverage for bodily injury liability.”
But the push comes as the state faces other significant insurance woes, namely in the property insurance market which a recent analysis described as “spiraling towards collapse.” The health care industry is similarly preoccupied with the effort to secure COVID-19 liability protections for providers.
A fast-tracked no-fault repeal would place both industries in a second major policy battle, seemingly with one hand tied behind their backs.