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Getting PIP Reform Right

Will the PIP reforms work, and will they bring auto insurance rates down? Legislators want proof they made the right decisions, and they want it fast.

By Lynne McChristian | Updated on April 25, 2012
People who like to discover loopholes in new legislation typically wait for the ink to dry on the governor’s signature before wrangling through the holes. But there is no such decorum in Florida when it comes to pending no-fault auto insurance reforms. 

Florida Gov. Rick Scott had not even received HB-119 when an “enterprising” medical staffing company already began advertising ways to circumvent the intent of the bill’s provisions. Is this the first clue that reform of no-fault—also known as personal injury protection (PIP)—is doomed? Hopefully not. Yet, it is certainly not a clean launch to reforms intended to stem the PIP abuse that is blamed for deteriorating loss trends and rising insurance premiums.

On the last day of the legislative session, Florida lawmakers passed a bill to make changes to PIP to fight the fraud associated with staged accidents and abuses of the $10,000 mandated PIP benefit, a pot of gold being dipped into through illegal or improper medical billing and an ever-rising number of lawsuits. 

Unscrupulous PIP dippers caused the average cost of each claim to rise by more than 60 percent over the past four years. Claims payouts averaged $5,812 in 2008 and soared to $9,478 in 2011, according to the Insurance Information Institute (I.I.I.). A report by Florida’s insurance consumer advocate clearly noted that costs exceeded premiums, with Florida auto insurers paying out $1.15 in losses for every premium dollar collected. 

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