Repeal and replace no-fault insurance

If Florida drivers don’t get a replacement for the state’s overpriced no-fault auto insurance system this year, it will be Tallahassee’s fault.

Bills in the House and Senate would abolish the nearly five-decades-old requirement to purchase $10,000 worth of Personal Injury Protection as part of the policy. Five years ago, the Legislature tried to reform this outdated system. Now, it’s time to end it — with guidance.

Legislators had good intentions when they adopted no-fault in 1971. The goal was quick compensation for people injured in minor accidents, thus keeping paycheckto-paycheck employees from needing welfare, and to limit the number of lawsuits. By cutting litigation, the theory went, premiums would fall, and even policyholders without lawyers would get fair recovery.

Unfortunately, bad Florida overcame good government. Fraudsters bilked the system, notably by faking accidents and billing insurers for just up to the $10,000 limit. Lawyers still elbowed their way into the system. Florida remains just one of 12 no-fault states.

In 2012, the Legislature passed the most recent in a series of PIP reforms. This one included 16 provisions to reduce insurers’ costs, with the idea that those savings would mean lower premiums. Examples: PIP no longer would cover massage therapy, acupuncture and chiropractic care.

Legislators, however, rejected the requirement for a 25 percent rate cut by January 2014. Gov. Rick Scott agreed. Savings became just a goal. Meanwhile, most of the special interests that stood to lose under the legislation filed lawsuits. Several are still going through the courts. The Florida Supreme Court just ruled for Allstate in a case involving reimbursement rates.

So Sen. Jeff Brandes, R-St. Petersburg, and Rep. Bill Hager, R-Boca Raton, have filed bills that would abolish PIP. Brandes is known for wanting to break the china when it comes to the insurance industry. When congressional legislation caused premiums for the National Flood Insurance Program to rise sharply, Brandes worked to start private-market flood coverage in Florida.

As with attempts to repeal the Affordable Care Act, however, the question is what would come after the Legislature abolished PIP. The bills don’t address that. A September 2016 study for the Legislature calculated that abolishing PIP could cut liability premiums by nearly 10 percent – depending on what drivers bought to replace it.

Michael Carlson is president of the Personal Insurance Federation of Florida, a trade group that includes Allstate, Progressive and State Farm, but not Geico. The federation claims that its members make up nearly half of the auto insurance market.

Even the industry isn’t certain about repeal. “There are difficulties with PIP,” Carlson acknowledged in an interview with the Sun Sentinel Editorial Board. “But we are conflicted. We are not in agreement. We need to see what could come next.” The group opposes repeal with no direction for the market.

Few issues directly affect more Floridians, which means that there’s a lot of money at stake. Medical providers, especially hospitals, worry that without PIP, they would get many more uninsured accident victims. Uncertainty over the federal health care law, which has given nearly 2 million Floridians insurance coverage, only exacerbates those worries when it comes to PIP.

The system, however, must change. Two weeks ago, the Senate Banking and Insurance Committee heard a presentation on PIP from the Office of Insurance Regulation. Our reading is that the 2012 legislation has benefited insurers more than consumers. Studies show that Florida drivers pay some of the highest insurance rates in the nation for the least amount of coverage.

One much-discussed alternative would be to require that drivers purchase Bodily Injury coverage. Many drivers already buy it, to buttress their policy if they have more assets. The issue then would become how much coverage to require. Carlson said his companies worry that if the requirement is too high, more drivers will forgo insurance. Hospitals also dislike that scenario.

The legislative study, by Indiana-based Pinnacle Actuarial Resources, is a mindnumbing 416 pages. It examines the 2012 law and what repeal would bring. We will save you the reading time:

What Florida did in 1971 hasn’t worked for a long time. What Florida did five years ago isn’t working. Those 38 states that have abolished PIP know something that Florida doesn’t. So end PIP and switch to mandatory Bodily Injury, with policy limits high enough to provide adequate coverage, but not so high that people don’t buy it.