The Senate is considering a bill that would replace Florida’s no-fault auto insurance system with a bodily injury system, but Chief Financial Officer Jimmy Patronis said it could raise rates on “those that can least afford it.”
The bill (SB 54), sponsored by Republican Sen. Danny Burgess, would eliminate personal injury protection coverage in favor of bodily injury liability coverage.
The current system requires drivers to carry a $10,000 personal injury protection (PIP) policy. The coverage pays out regardless of who is at fault. Bodily injury (BI) coverage, meanwhile, 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. Unlike PIP, it doesn’t pay out immediately.
“The last three years in a row, I’ve expressed my reservations about switching from PIP to BI because the outcome has shown an increase in insurance costs. I still have those reservations,” Patronis said Tuesday. “I grew up in a service industry, I had employees that work from month to month, and if you increase their insurance rates by $15 or $18 a month, that’s real money to somebody’s pocket.
“I think that ultimately happens when you go to the household budget, and you say, I want to increase your insurance rates by X number with a state mandate, people will make choices. They’re not going to stop paying the property tax bill because they don’t want to lose their home, but they may go naked on their car insurance.”
Florida already has one of the highest uninsured rates in the county, with more than a quarter of motorists driving without insurance in 2015 — double the national average.
The costs of uninsured drivers are passed along through uninsured motorist’s coverage — so, the more 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 the Office of Insurance Regulation 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.
Patronis mentioned those as possible consequences if the switch was followed by higher insurance rates.
“Are you going to see increased utilization and Medicaid? Are you going to see increased uses of other insurance products? Are you going to see increases in bad debt at hospitals?” he said.
Proponents of the repeal and replace plan often cite alleged widespread fraud in the PIP system, though actuarial studies have often relied on ‘guestimates’ to quantify phony claims and the effect they have on overall rates.
Patronis acknowledged there are problems with PIP, referring to it as a “broken system that works.”
“I think it is an insurance product that’s out there that does solve some problems. But just like with any program that we have in the state — anything that’s mandated — there’s going to be the rule of numbers, there’s going to be some room for fraud, some room for gaming the system.”
“Again, I don’t know if what’s being proposed is going to be a solution to fix that, or just an increase ultimately,” he said. “Danny Burgess is a fantastic legislator who understands insurance. He’ll do right by this.”
SB 54 has already cleared its first committee. It is now awaiting a hearing in the Senate Judiciary Committee.