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New PIP Law May Lower Car Insurance Premiums In Florida

Car insurance premiums in Florida could drop by 14 to 24.6 percent thanks to changes in the state’s Personal Injury Protection regulations a recent report predicted. Unfortunately, insurers cautioned consumers that other costs could offset those savings and state regulators warned that overall rates may not decline at all.

The intent of the new law is to reduce insurance fraud which is a large problem in the Sunshine State. The statute allows a penalty if a false application is discovered.

Skeptics Abound

Skeptics doubt the effect it will have on fraud and are almost certain that consumers will not see any rate reductions despite the big cuts in benefits that the law puts into place.

The law was one of Governor Rick Scott’s top priorities. Under the new legislation car insurance companies are supposed to reduce PIP rates by 10 percent no later than October 1st and 25 percent by 2014. If they fail to meet these requirements they must offer regulators a valid reason why. According to the new law, insurers have a right to petition for exclusion from the rate reduction which makes rate drops unlikely.

A report released by Pinnacle Actuarial Resources Inc. calculated premium drops in the range of 12 to 20 percent. The State Office of Insurance Regulation threw a big bucket of cold water on the predicted savings when it released a statement warning that other factors might offset those savings. According to the statement, “This projected savings may actually mitigate premium increases, not reduce premiums.” Put another way, insurance bills are not likely to decrease, they might simply increase a little less than they normally would. 

PIP coverage is about 20 percent of the overall insurance cost for most consumers so if the full reduction of 25 percent went into affect it would drop most consumers’ insurance bill by about 5 percent.

Insurers are Already Warning Premium Drops Might Not Happen

Insurers are already hedging on premium drops. An industry group urged consumers to have caution and patience with rates. Other industry groups question the conclusions of the study and warned that the study did not calculate the cost of legal challenges to the new PIP law by plaintiffs and their attorneys. Insurers are also warning that various, as of now unnamed expenses could erase those savings for policyholders.

Consumer insurance advocates warn that the new law drastically cuts benefits while offering no guarantee that rates will drop. Critics claim that the mandatory $10,000 PIP coverage forces Florida residents to effectively pay twice for medical coverage, once through their health insurance and again via the required PIP coverage. The law eliminates benefits such as acupuncture and massage and puts a cap on non-emergency care at $2500. The law also requires that a Finding of Emergency Medical Condition must be made within 14 days of the accident and if not filed in time, total benefits are restricted to $2500.  

While there are plenty of critics Jeff Atwater, Florida’s Chief Financial Officer believes that the law will eventually help consumers. In a recent statement he said, “Through reforms passed last legislative session, we were able to target the fraud in Florida’s auto insurance system that has caused rates to skyrocket for Florida drivers. The independent analysis released today reflects my firm belief that getting at the root of the fraud in our personal injury protection system will give Florida’s consumers the rate relief they deserve.”