Will we see a decrease in Florida’s PIP auto insurance premiums?

Recent changes in Florida’s Personal Injury Protection auto insurance system may result in decreased premiums paid by consumers, according to a report released by state regulators.

The report, prepared by Pinnacle Actuarial Resources Inc., calculated the percentage of savings that consumers may see under a new law that passed this spring. The company’s initial calculations were that consumers would see a 12 to 20 percent reduction in premiums, but the official report released in August of 2012 showed potential savings of 14 to 24.6 percent.

Insurers were required to file PIP rate reductions of at least 10 percent on October 1 and at least 25 percent by 2014, or face explaining to regulators why they did not reduce their rates. These rate reductions come as an exchange for benefit cuts, which were implemented in an attempt to cut down on $1 billion in auto insurance fraud.

This seems like good news to consumers across the state, who are required to purchase Personal Injury Protection (PIP) auto insurance to cover injuries caused in traffic accidents. This type of coverage has the effect of making Florida residents pay twice for medical insurance. They must have at least $10,000 in PIP coverage to legally drive in the state. A reduction in rates seems fair, particularly when benefits are being slashed in an attempt to stop fraudulent claims. Insurers and regulators alike, however, have cautioned that the savings may not be what they seem.

For most drivers, PIP auto insurance costs account for approximately one-fifth of their overall auto insurance bill. This means that even a full 25 percent reduction in PIP premiums would only result in a 5 percent decrease in the overall cost of insurance. The Florida Office of Insurance Regulation further warns that the savings outlined in the report may actually only limit future increases in PIP premiums, not necessarily reduce current PIP costs, stating, “This projected savings may actually mitigate premium increases, not reduce premiums.”

The executive director of a consumer advocacy group in the state is skeptical that consumers will see any benefits from the new legislation, predicting that consumers would be unlikely to see rate reductions but would still lose benefits.

Florida’s Chief Financial Officer, Jeff Atwater, had a different view of the matter, stating that the reforms, in tacking the auto insurance fraud problem that has plagued the state, would “give Florida’s consumers the rate relief they deserve.

Under the new PIP auto insurance system in Florida, benefits for massage and acupuncture have been eliminated entirely, and non-emergency benefits have been limited to $2,500. Drivers must still have $10,000 in PIP coverage and insurers must have filed 10 percent PIP reductions by October 1, 2012 and 25 percent PIP reductions in 2014 or make a case to regulators as to why not.

Auto insurance fraud is a serious problem in Florida and across the U.S. It can drive up premiums and should be stopped, but we need to make sure that regulators do not interfere with the right of auto accident victims to seek fair compensation if legitimately injured in serious accidents. These changes in the PIP auto insurance system may or may not result in a reduction in premiums for consumers, but one thing is for certain: Crary Buchanan will continue fighting for our clients’ rights to maximum compensation inside and outside of the courtroom.

If you or someone you know has been injured in a collision and you would like to discuss your options and possible right to addition al compensation, please contact our firm for a confidential case review.

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