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Unpopular No-fault Auto Insurance Mandate Hangs On in Florida

Source: The Palm Beach Post

Posted on 10 Apr 2012

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Getting rid of no-fault insurance saved Colorado drivers 35 percent on their auto premiums, but Florida motorists won't get the chance to find out what that feels like this year.

Once he gets the bill, Florida Gov. Rick Scott is expected to approve an insurance law that would eliminate payment for massage therapists and acupuncturists but generally preserve a $2 billion-plus government-mandated coverage defended by hospital and insurance lobbyists.

"Instead of measures aimed at preventing true fraud, we're left with a bill that pads the pockets of big insurance companies while stripping consumers of choice and benefits," said Bill Newton, executive director of the Florida Consumer Action Network, after the bill's passage in the waning hours of the 2012 legislative session.

A few legislators in both parties tried in vain to suggest an alternative - kill a mandate that effectively forces drivers to pay twice for medical insurance most already have.

One option: End personal injury protection (PIP) insurance and instead require bodily-injury liability insurance, which by one estimate is carried by 76 percent of Florida drivers.

Auto insurance premiums dropped by 35 percent after Colorado became the latest state to kill a no-fault system in 2003, according to a 2008 consultant's report for Colorado's governor . That's a net result after a modest rise in rates for bodily-injury liability insurance, which Colorado requires.

Average yearly savings per vehicle: $322.

And rates have been stable since, said Robert Ferm, who admitted he was once skeptical about Colorado's switch.

"I was pleasantly surprised it works," said Ferm, who served as legislative counsel for the American Insurance Association, a trade group representing insurers in Colorado's debate. "It was not really the catastrophe that was anticipated."
Perennial complaints

By contrast, a state working group in December found Florida's system produces "staggering" rate increases, with some families being forced to pay more than $3,000 in required annual PIP premiums for only $10,000 in coverage. Florida is one of 10 states remaining with a no-fault system.

PIP began in the 1970s in Florida as an attempt to cut down on lawsuits and get payments out quickly for injuries in minor car accidents. But it produced its own waves of lawsuits and for decades has been a perennial source of complaints about fraud and high premiums, despite many reform attempts.

The bill that passed on the session's final day would weaken one of the original arguments for PIP - that it settles claims within 30 days. Auto insurers now can take three times longer to review claims that they suspect of fraud.

Insurers would be asked but not required to reduce PIP rates 10 percent by Oct. 1 and 25 percent by 2014. Carriers could make a case for why they should not have to reduce rates. They could cite, for example, increased legal costs for sorting out claims under the new law.

Policies vary, but for many drivers PIP represents about 20 percent of the total bill. So the overall reduction by 2014 on a Florida driver's total car insurance bill might be closer to 5 percent - or less, if insurers persuade regulators cuts are not justified. In return, injured drivers would face lots of new restrictions:

    •    No massage therapy or acupuncture.
    •    Must get treatment within 14 days.
    •    No full $10,000 benefit except for an "emergency medical condition." Limit for other qualified treatment: $2,500.

Yet Florida drivers still would be required to pay for PIP, no matter how much health insurance they have through private insurers or government plans such as Medicare.

Scott defended his vigorous efforts to change PIP - as opposed to killing it - a day before the legislation passed.

"If you can fix PIP, that'd be great," Scott said. "But if we can't, the citizens are going to want us to get rid of it. My expectation is, we're going to have something that's a fix, and cracks down on people doing the wrong thing."
Another argument for PIP - that some drivers have no other medical insurance - could be addressed by requiring it only for those who