Florida Considering Dropping PIP

Posted & filed under Car Insurance News.

A few weeks ago we wrote about New Jersey’s overhaul of its Personal Injury Protection (PIP) claims system – an effort to reduce the number of opportunities for fraud and excessive claims by medical professionals. Now Florida is considering scrapping PIP entirely, or at least removing the mandate that requires this type of insurance cover.

Florida is one of only two states that require third-party cover, but not for injuries inflicted on other people.   That means that the chances of being hurt in an accident caused by a driver who does not have the insurance to pay for your injuries are considerably higher than in most states.   However, Gov. Rick Scott and Chief Financial Officer Jeff Atwater have suggested that it is either time to fix the current system, or do away with it entirely.

Costing Insurance Customers Too Much

It’s a question of value for money – not on the customer’s part, but on the insurers.   Of course, it’s the customers who are footing the bill, but insurance companies aren’t exactly making a profit either.   The pile-up of fraudulent insurance claims continues, despite steps being taken to limit loopholes that can be exploited.

The cost of PIP insurance claims has climbed nearly 70% from 2008 to 2010.   Some of that increase can be attributed to the cost of medical treatment, but not 70% – and the numbers show that Florida is having fewer and fewer car accidents every year. The rest, says Atwater, are scams. “Fraudsters and hucksters [have] perfected the system of finding the weak points and taking advantage of that.”

PIP was originally implemented in 1971 as a way to reduce the number of lawsuits that resulted from car crashes with uninsured drivers.   It meant that you knew your injuries were covered, regardless of the insurance status of the other driver.   In a state where it is not required to carry cover against injuries caused by you, this made a lot of sense.

However, health professionals and opportunists quickly spotted that there were a number of ways to cheat the system by double charging for medical procedures, or by prescribing expensive and unnecessary treatments – a “victimless crime” if you asked any of the perpetrators, as it was only a faceless insurance company taking the hit.

However, the costs have been so successfully passed on to consumers that the average insurance customer is bearing most of the brunt.   The increase in the price of Personal Injury Protection has cost the average couple with two kids an extra $100 a year compared to 2008, and that number will grow again next year.

PIP Keeps Medical Insurance Low, Say Opponents

Those opposed to removing the requirement for PIP claim that, because the cost of medical procedures is born by these policies, it keeps the cost of regular medical and auto insurance down.   Bruce Ruben, president of the Florida Hospital Association, agreed. Bodily injury protection, he said, “requires litigation before the insurance is available.”

The medical community is highly protective of PIP. When the mandate ended in 2007, hospitals and other providers argued that failing to reinstate it would simply shift auto insurers’ costs to health insurers

Injured drivers without PIP would rely on their health insurance, Ruben said, potentially raising premiums. The rate of uncompensated care would increase, as many injured motorists without PIP or health insurance would be unable to afford their treatment.

But Michael Carlson, head of the Personal Insurance Federation of Florida, pointed to a 2008 study in  Colorado  that indicated health insurance rates rose only 1.6 percent when that state dropped its no-fault/PIP system in 2003. The side effect of this is that hospitals, ambulances and emergency services brought in $80 Million less.   There have not been any layoffs yet, but the sector is earning far less money, and insurance companies are more or less earning the same.

While the medical insurance industry is fighting for PIP, most of the insurers, and insurance customers, in Florida are arguing that the system is broken and needs to be fixed, or done away with entirely.