Fighting automobile insurance fraud is a top priority for Gov.
, key legislators, regulators and the insurance industry this year because they say it's driving up premiums.
But insurers say they can't guarantee lower insurance rates, even if legislation is passed to combat personal injury protection, or PIP, insurance fraud.
PIP pays medical bills for policyholders injured in auto accidents, regardless of which driver is at fault, and state law requires drivers to have at least $10,000 in coverage. The requirement was intended to protect Floridians who don't have health insurance and to avoid lawsuits and their costs for minor injuries.
The obvious question is: If fraud is causing rate increases and laws are passed to fight it, why can't the savings be passed to consumers?
Here's how the experts answer it and other questions:
Q. Will my automobile insurance rates decrease if legislation is enacted to reduce PIP fraud?
A. No, at least not right away.
Insurers would be required to either decrease rates or go through a lengthy process to ask to hold or raise rates, under a draft of the House insurance committee's bill to fight PIP fraud.
Several state leaders have said they'd want insurers to be required to lower rates if legislation is enacted — similar to provisions in previous years that required home insurers to pass savings to consumers. Insurance industry representatives say that would be hard to do with automobile insurance for several reasons:
Rates are based on losses in previous years,
so it would take at least a few years to know whether the legislation helped enough to lower premiums.
Providers could find ways around legislation,
allowing savings in one area to be offset by higher costs in another. For instance, the Legislature effectively set fees in 2007 for what health care providers could charge for PIP claims in 2007, but it did not limit how many procedures could be billed, said Michael Carlson, executive director of the Personal Insurance Federation of Florida, an insurance trade group with members that include Allstate, Progressive and State Farm.
"Thus, no cost savings for consumers have been realized," he wrote in an email.
Laws would have to survive
legal challenges, and lawsuits could drive up costs.
Q. If law enforcement cracks down on staged accidents that result in fraudulent PIP claims, will insurance costs decrease?
A. No, because fake accidents aren't the only way PIP is being taken advantage of. Most people have $10,000 in PIP coverage, so state regulators say some health care providers bill for services that patients may not need, such as repeated
visits or massages.
Q. How much have Floridians' automobile insurance premiums increased in recent years and how much of the increase comes from PIP versus other coverage?
A. State officials have provided examples of skyrocketing premiums for PIP coverage for some insurers. At the same time, the total premiums insurers collected for PIP coverage in Florida haven't changed much from year to year over the past eight years.
The state's five biggest auto insurers, which have about 44 percent of the market share, raised premiums 12 percent to 16 percent from Jan. 1, 2009, to Aug. 1, 2011, according to the Office of Insurance Regulation. Increases ranged from 35 percent to 72 percent for the PIP portion of coverage and 33 percent to 46 percent for bodily injury coverage. Uninsured motorists' rates decreased for two insurers and increased by 49 percent to 68 percent for three.
But all PIP premiums in Florida haven't changed much over the past eight years, according to OIR data.
Insurers sold PIP coverage worth $2.4 billion in premiums in 2010, $2.2 billion in 2009 and $2.5 billion in 2008 — all close to the $2.4 billion average for the past eight years. About one-fifth of the premiums in recent years and during the eight-year period on average for private passenger automobile insurance — PIP, other liability insurance, and physical damage — went just to PIP coverage.
What accounts for the difference in individual PIP rates and statewide total premiums? Some insurers charged less than needed to pay claims and other costs, according to insurance experts.
"There were price decreases for auto insurance over those years due to intense competition," said Lynne McChristian, a spokeswoman for the Insurance Information Institute, a trade group.
At the same time, the number of licensed drivers in the state has remained relatively stable the past few years, she said.
It appears some PIP premiums in parts of Florida for at least one large insurer are much higher than those in other states that require the coverage. Regulators told the Florida Cabinet that the insurer's online quoting tool showed that the price for six months of $10,000 in PIP coverage for a 25-year-old single female is $520 and $850 for certain parts of
, respectively. Meanwhile, the insurer's quotes were $190 in a part of Detroit and $350 in a part of
Q. What has the state done to fight PIP fraud
Legislation in 2001, 2003 and 2007 limited outsiders' access to crash reports, beefed up licensing requirements for clinics and limited how much insurers can be charged for treatments. But the laws didn't lower costs.
The state's Division of Insurance Fraud created dedicated law enforcement teams since 2009 to investigate PIP fraud in Broward and
counties and the
areas; the position of statewide PIP coordinator more than a year ago to train investigators in other parts of the state to fight fraud as the agency has in South Florida; and added a second law enforcement squad more recently in Tampa and a third in Miami.
The efforts may have helped. The percentage of PIP claims proven fraudulent decreased in recent years. Since mid-2007, the share of suspicious claims that resulted in convictions dropped to 4 percent this year, from 8 percent in 2007, according to the insurance fraud division.
Q. What if drivers were no longer required to have PIP insurance?
A. Health industry officials say that without PIP coverage, taxes and other health care costs could rise. More than 1.3 million, or over a fifth of the 6 million emergency room visits a year in Florida, are for patients without any form of insurance, according to the Florida College of Emergency Physicians.