Florida Releases Study on Financial Impact of PIP Reform

The Florida Office of Insurance Regulation (“OIR”) and the Legislature spent $150,000.00 of your tax dollars to pay Pinnacle Actuarial Resources, Inc., to perform an Impact Analysis of HB 119, the New PIP Law. The report was finally made public on August 21, 2012. The purpose of the study was to estimate the cost savings, in terms of consumer premium dollars, of the new mandated PIP reforms. Among these reforms is capping treatment to only $2,500.00 in benefits unless an Emergent Medical Condition is established, and imposing more conditions that consumers must comply with to get any benefits at all (i.e.,must treat within 14 days of accident, must do Examination under Oath, and must do IME).

The report notes that the findings of the same are simply projections, based on data supplied predominately by the insurance industry and OIR, and “guesses” based on what the projected effects of the reforms that take place on 1/1/2013. The report is adamant in expressing and urging caution based on the same. (Note – doesn’t it really seem like a good use of $150,000.00 of tax payer money for a report of educated guessing?).

The report basically concludes that PIP claims may experience a savings of 16.3% to 28.7%, while PIP premiums may experience a savings of 14.0% to 24.6%. The report is clear that claim loss savings cannot be used interchangeably with premium savings. Based on the same, they conclude that the 16.3% cost savings only equates to a 14% premium savings.

However, while PIP premiums are projected to potentially drop by this 14%, the report makes clear that Bodily Injury and Uninsured Motorist claim payouts and premiums will rise. The report estimates what I find to be a very conservative 3% to 4.7% increase in BI and UM premiums. I think it is conservative because, as documented in the report, the offset in BI and UM claims, due to a $7,500.00 reduction in benefits, will only be $2,500.00 or less in most BI and UM claims. That means that BI or UM has 75% additional exposure, at a minimum, starting with claims occurring on or after 1/1/2013.

My take on the report is that it is highly speculative, conservative, and likely flat out wrong. You need not look further then the latest PIP rate filing by Florida Farm Bureau Insurance Company, which is seeking and been approved for an 8% PIP rate increase, and not a decrease of any sort. Mark my words: “New PIP” will fail and rates will not drop – EVER! Also, the commensurate increase in BI/UM rates, along with the additional burden on Hospitals, health care providers and health insurers, make this law an epic failure. I hope I am wrong, but do the math, and look at other states. The cheapest insurance states simply don’t do PIP; neither should we.