Insurance Information Institute Reminds Florida Auto Insurers of October 1 Deadline to Submit Filing Showing At Least 10 Percent Rate Reduction–Or Documentation Why Not
Sep 28, 2012
The Insurance Information Institute (“III”) advised today, September 28, 2012, that prior to substantive Personal Injury Protection Insurance (“PIP”) reforms effective January 1, 2013, Florida’s auto insurers have an October 1 deadline to submit a rate filing to state regulators showing at least a 10 percent reduction in auto insurance rates–or document why they cannot.
The III news release, hyperlinks to a white paper on HB 119 and Florida PIP Reform, and a blog on the subject from III Florida Representative Lynne McChristian are reprinted below.
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No-Fault Reforms So Far Have Had Little to No Impact on Rates
TAMPA, Florida, September 28, 2012 – The process of combating the effects of many years of fraud and abuse of no-fault auto insurance coverage in Florida with meaningful legislative reforms begins on October 1, says the Insurance Information Institute (I.I.I.).
Although the launch of major fraud-fighting reforms to the state’s No-Fault Law, also known as Personal Injury Protection (PIP), does not begin for three months, Florida’s auto insurers have an October 1 deadline to submit a rate filing to state regulators showing at least a 10 percent reduction in auto insurance rates-or document why they cannot.
The rate filing process represents a small first step in the implementation of the substantive PIP reform measures that will take effect on January 1. It will be even longer before insurers can accurately measure the impact of reforms on actual claims costs.
Insurance companies already file rates annually, making rate filings a matter of routine. The I.I.I. notes that insurance rates are based on the claims costs experienced by individual companies. Clearly, auto insurance claims costs have not yet been affected because no significant PIP reform measures are yet in place. Before a rate filing brings rate changes, insurance regulators must approve the new rates, a process that can take up to 60 days. Then, policyholders see the new rates when their insurance policy renews.
Auto insurance rates in Florida have been trending upward for several years, and reversing course involves a number of steps. Initial changes with no-fault reform started with two provisions that became effective in July, neither of which directly contributes to the price drivers pay for auto insurance coverage. One provision involved health clinic licensing; the other requires law enforcement to use the long version of a crash report whenever injuries occur in a car accident.
Provisions expected to have the most impact on rates become effective in January 1, 2013, such as limiting the cost of non-emergency treatment and excluding massage therapy and acupuncture as PIP treatment options. These changes also include providing the full $10,000 PIP medical benefit for medical emergencies only and establishes where treatment can be administered and by whom. Those needing non-emergency treatment will have a medical benefit limit of $2,500. No-fault auto insurance compensates people injured in car accidents regardless of fault. Escalating fraud associated with staged crashes, along with faked or exaggerated injuries, illegal or improper medical billing and the increasing frequency of lawsuits, has caused auto insurance rates to rise.
The Florida Office of Insurance Regulation’s PIP data call discovered that the number of auto insurance claims rose by 66 percent between 2006 and 2010, during a time marked by a decline in the number of auto crashes. An I.I.I. analysis also showed a dramatic rise in the cost of each claim-from an average of $5,812 in 2008 to a peak of $8,796 by the end of 2010.
“This trend in rising costs did not happen overnight, and turning the tide in the right direction will also take some time,” said Lynne McChristian, Florida representative for the I.I.I.
“There is real optimism that the reforms will take hold quickly, and the expectation is that we’ll see the proof around this time next year.”
An important reminder about the reforms to Florida’s no-fault auto insurance law: The most significant changes do not go into effect until January 2013. So if you’re looking for big rate relief now, it can’t happen because very little has changed in the three months since the law first became effective.
There are some people finding fault already with Florida’s no-fault, also known as Personal Injury Protection (PIP). That’s rather like panning a movie before it has been produced. You are hearing many people say the effectiveness of the reforms remains to be seen, and they are saying that because there is nothing to see – yet.
Phase One of the PIP bill, HB 119, launched July 1 with changes that have little to no impact on auto insurance rates. One provision requires law enforcement to use a long-form crash report when anyone at an accident scene is injured or complains of pain, when a vehicle in inoperable or when a commercial vehicle is involved. This is to prevent someone from saying later that they were injured when they were not or claiming they were inside the car when the accident occurred when they were nowhere around.
The other provision effective in July was to require health care clinics to be licensed to receive PIP reimbursement. Licensing is part of the larger picture of who can provide medical care, but it won’t drive rates down all by itself.
An independent report on the fiscal impact of HB 119 showed that using the long-form crash report would have a maximum impact on rates of -1.5% on the 20% of the auto insurance premium that comprises PIP costs. Clinic licensing would have zero impact. Despite this, insurers were required by the PIP reform bill to file rates by October 1 showing at least a 10% rate reduction or document why a reduction is not possible. Keep two things in mind:
- Insurance rates reflect insurance costs, and there has been nothing implemented by the new law (yet) to reduce costs.
- The October 1 deadline to file auto insurance rate decreases will not have an immediate impact on rates because the Office of Insurance Regulation (OIR) has up to 60 days to review rate filings. Even if rate approval was instantaneous, new rates apply when a policy renews, not the moment they are filed. All the rate filings are public record, accessible via a file search on the OIR website.
Of the 16 major categories for PIP reform, only two have the potential to drive down PIP costs – and those two changes don’t happen until January. These “Phase Two” changes involve limitations on medical benefits for non-emergency treatment and excluding massage therapy and acupuncture as treatment options. You can read the paper on PIP changes for more details.
RELATED LINKS White Paper: Florida PIP Reform – HB 119
Facts and Statistics: Auto Insurance
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