Auto Insurance

From the National Association of Mutual Insurance Companies: "Omnibus Trend, Growth of Municipal Accident Response Fees." April 2006

"Across the country and in most Midwestern states, including Illinois, Indiaina, Iowa, Michigan, Missouri, Ohio and Wisconsin, insurance companies are facing the growing phenomenon of cash-straplped municipalities billing insurance companies for police or fire responses to auto accidents, no matter how routine or minor...Providing coverage for police or fire responses to auto accidents would most likely result in rate increases passed along to consumers." 

Municipal Accident Response Fees: NAMIC White Paper



AccidentResponse expresses insurance community concerns about municipal response fees and is an advocacy site. 

The Senate issued its formal summary of Special Session C on October 19, 2007. It includes a Banking & Insurance Committee report on HB 13C, which revived and reformed PIP/no-fault, and an accompanying public records exemption bill.

Senate Summary of PIP Reenactment Bill from Special Session C

From the Senate Banking & Insurance Committee staff summary of SC 40C, the Senate’s package reviving and revising no-fault, a version of which was passed on October 5 during a special session of the Legislature. The analysis is dated October 4, 2007.

Coverage After No-Fault’s Repeal

The auto insurance market in Florida is competitive and motor vehicle insurance is readily available to Florida drivers. There were 357 companies writing private passenger automobile insurance with a total of 12 billion dollars in direct written premiums during 2006.7  The total direct written premium for PIP coverage during this same period was $2,523,180,556.8  The number of drivers in Florida’s residual or involuntary market has been declining over the past several years which is another indicator that the voluntary market is viable. As of June 30, 2007, there were only 39 private passenger vehicles insured by the Florida Automobile Joint Underwriting Association as compared to 1,546 vehicles insured on June 30, 2005.

The great majority of Florida drivers carry the two mandated coverages (PIP and PD) according to estimates by the Department of Highway Safety and Motor Vehicles (DHSMV) which maintains data as to the number and percentage of vehicles that have at least the minimum required coverages.9  There are an estimated 12,386,222 private passenger, non-commercial vehicles registered in Florida and 94.51 percent (11,706,218) of these vehicles have the requisite PIP and PD insurance, while 5.49 percent (680,004) are uninsured.10

(From FIC: PIP/no-fault expired or "sunsetted" on October 1, 2007. It is being reenacted as a mandatory coverage effective January 1, 2008, with substantial changes, including caps on charges from PIP providers and new restrictions on PIP clinics. PIP will be a voluntary coverage between now and January 1.)

The latest statistics from the Division of Insurance Fraud indicate that fraud and abuse continue to permeate the no-fault system. Incidents of PIP fraud and abuse are increasing and constitute the majority of criminal cases referred to the Division. According to Division representatives, the PIP laws are being exploited by sophisticated criminal organizations in schemes that involve staging crashes, manufacturing false crash reports, adding occupants to existing crash reports, filing PIP claims using contrived injuries, colluding with dishonest medical treatment providers and unscrupulous attorneys to fraudulently bill insurance companies for unnecessary or nonexistent treatments, and patient-brokering (referring patients to medical providers for a bounty).

The General Appropriations Act for 2007-08 appropriated an additional $1.25 million to the Division, which funded eight additional Law Enforcement Investigator II positions to be located in Miami. The positions will be utilized primarily to investigate PIP fraud, but will also be used to investigate other types of insurance fraud cases. In addition, the appropriation enabled the Division to increase the salaries of thirty investigators based on merit. These positions are located throughout the agency and handle all types of criminal fraud investigations. The Division is in the process of creating a Law Enforcement Trainee Program which will allow the agency to supplements its current force with both sworn and non-sworn personnel to investigate and analyze insurance fraud cases. The program is in the development phase.

Auto Premiums and Expenditures

Florida drivers paid the 8th highest auto insurance premiums in the country in 2004, according to the most recent data obtained from the National Association of Insurance Commissioners (NAIC).11 The 2004 combined average premium for the primary coverages is $1,150.64, which is 20 percent greater than the national average of $959.76. Florida is the 6th highest among
all states when calculating average expenditures ($1,062.31), which is 27 percent higher than the national average of $837.86.12 Florida’s ranking has risen since 2002, when the state ranked 14th ($931.15) in combined average premiums and 13th ($870.35) in average expenditures. In that year, Florida’s average premiums were 6 percent greater than the national average ($879.99) and 12 percent higher than the national average ($773.68) for average expenditures.

Florida’s no-fault system, like other no-fault jurisdictions, typically provides the most
comprehensive benefits as to scope of coverage for minor and serious injuries resulting from an auto accident. Because no-fault states restrict the right of injured parties to sue for non-economic damages (“pain and suffering”) for most injuries, they offer broader first-party PIP benefits than do tort states. This tends to put upward pressure on costs in no-fault states.
Personal injury protection costs are unnecessarily high in Florida and other no-fault states
because, for the most part, there are few cost controls for medical services.13 The state’s no-fault system lacks the cost controls found in health insurance, e.g., fee schedule arrangements with providers, utilization protocols, preferred provider networks, HMO groups. Average premiums/expenditures therefore appear to be highest in no-fault and add-on jurisdictions as
opposed to tort states. In 2004, thirteen no-fault and add-on jurisdictions ranked among the top half of all states for both combined average premiums and average expenditures.

Another factor which contributes to higher premiums/expenditures is traffic density. Florida has the 9th highest motor vehicle density in the country which is an indicator of concentration resulting in a higher-than-average number of collisions and hence, insurance claims.14 Insurance rates tend to be higher in more densely populated and urbanized areas than rural areas. Eight out of every 10 miles (81.5 percent) are driven on urban roads in Florida.15 Other indicators of an urban  environment believed to result in higher auto rates are more expensive health care (primarily due to a lack of cost controls), a greater level of claims consciousness and a greater tendency for auto accident victims to hire attorneys.16

6 Section 324.071, F.S.
7 National Association of Insurance Commissioners and Florida Office of Insurance Regulation.
8 Office of Insurance Regulation.
9 Motorists must show evidence of insurance at the time of vehicle registration with the DHSMV (s. 320.02(5) (a), F.S.), when purchasing or renewing license tags (s. 320.02(5), F.S.), and such proof must be carried at all times while a driver operates a vehicle (S. 316.646, F.S.). Motorists are subject to civil and in some cases criminal sanctions should they violate these provisions (s. 316.646, F.S.).
10 This data is based on DHSMV reports for July 2007.
11 National Association of Insurance Commissioners, Auto Insurance Database Report, 2004. The NAIC data for 2004 measures the legislative cost of automobile insurance to consumers in each state. The combined average premium per insured vehicle is calculated by summing the average premiums for three coverages: liability, collision and comprehensive coverages. The result
is the average cost of an auto insurance policy in the state that contains all three coverages.
12 The average expenditure per insured vehicle is the total written premium for liability (BI, PD, Med. Pay, and in no-fault states, PIP), collision and comprehensive coverages divided by the liability written car-years (exposures) in that state. This assumes that all insured vehicles carry liability coverage, but do not necessarily carry the physical damage coverages,
collision and/or comprehensive.

This is an excellent Senate Banking & Insurance Committee summary of CS/HB 13C, passed by the Florida Legislature on October 5, 2007, in the October 3-12 special session. The package is to be signed by Governor Charlie Crist next week. It revives and reforms PIP/no-fault.

A reformed PIP/no-fault auto insurance system is on its way to the Governor for his signature following House and Senate approval Friday.  The Governor is expected to sign the measure into law, re-enacting a mandatory PIP/no-fault law effective January 1, 2008.  Companies would have until November 15 to submit notice and explanation to policyholders.

The Senate Banking & Insurance Committee provided this summary of the provisions in CS/HB 13C outlining the three-month transition to the revised PIP January 1, 2008. It was used by Banking & Insurance Chairman Bill PLosey, R-rockledge, to explain the final compromise on the Senate floor today.