In a late-night session in early March, the Florida State Senate passed a bill that makes sweeping reforms to the state’s personal injury protection (PIP) insurance laws. While Governor Rick Scott has identified the bill as a top priority for his administration, the bill faces criticism from those that believe it goes too far—or not far enough.
PIP insurance coverage is mandatory for all registered motorists in the state of Florida. Specifically, Florida requires drivers to purchase insurance which would pay up to $10,000 in compensation for medical costs and lost wages to policyholders injured in car accidents, regardless of who is found at fault for a crash.
Florida, Fraud and Fair Compensation
Unfortunately, the nearly certain chance of getting a PIP payout after being injured in an accident has spurred unscrupulous individuals to defraud the system, and Florida now is the number one state in the country for staged accidents. This fraud has cost insurance companies in payouts to false claims, causing a rise in insurance premiums for all other drivers. Premium hikes have been most severe in the Tampa Bay area and certain South Florida neighborhoods, often adding hundreds of dollars to premium costs every year.
State lawmakers, insurance regulators, insurance companies and other state officials would like to reform, or in some cases kill, the PIP insurance requirement to make it more difficult to resolve claims in hopes that doing so will reduce the rates of fraud and abuse on the system. However, opponents, including trial lawyers who represent injured victims, believe reforms may jeopardize an honestly injured individual’s chance at the compensation to which he or she is entitled through his or her insurance policy.
A Numbers Game
The controversy over PIP reform has been fueled by conflicting statistics regarding incurred losses and underwriting profits. Incurred losses are projected payouts and represent a percentage of premiums collected by insurers, but they do not represent actual losses for companies. Underwriting profit represents income from insurance premiums minus the cost of incurred losses and other expenses.
According to a report published by the National Association of Insurance Commissioners, an organization composed of state officials who regulate their state’s insurance industry, Florida’s insurers are experiencing a rise in incurred losses—as high as 77 percent last year—and a loss in underwriting profit, which was -16 percent in 2010.
However, other data suggest that these profit losses were also low, and sometimes lower, earlier in the decade, and incurred losses were higher during that same time. For example, in 2001, insurance companies incurred losses of 85.8 percent and an underwriting profit of -24 percent. While supporters of the bill can cite the data from the National Association of Insurance Commissioners as evidence that reform is needed, opponents use historical data to prove that insurance companies are no worse off today than they were 10 years ago.
The bill passed by the Senate in March would place limits on coverage, create a schedule of maximum charges in the event of a PIP claim, require insured, injured parties to submit to an exam while under oath, require the Department of Health to develop a list of non-medically necessary diagnostic tests and would ban the use of contingency risk multipliers when calculating attorney fees, among other changes.
While reforming PIP insurance may help reduce fraudulent insurance claims, it may also make it more difficult for policyholders injured in real accidents to receive the compensation to which they are entitled by their policy. If you or a loved one has been involved in an auto accident, please consult an experienced personal injury attorney to explore what legal options are available in your situation.