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Contact: Sam Miller, Executive Vice President
Florida Insurance Council, Tallahassee
(850) 459-3012 * This email address is being protected from spambots. You need JavaScript enabled to view it.

Key Legislative Meetings on Insurance Tuesday/Wednesday

The House and Senate insurance committees take up this week the top two property & casualty issues of the session – the comprehensive property insurance package Tuesday and on Wednesday PIP fraud and other issues in the auto insurance market. Both meetings will produce important background which will be useful as you monitor insurance legislation during the upcoming session.

The Florida Insurance Council welcomes the opportunity to discuss both of these initiatives with you. We are working with other insurance trades and they have important information to share as well.

The Senate Banking & Insurance Committee meets Tuesday at 1:45 p.m. in Room 412, Knott Building, to take up SB 408, this year’s comprehensive property package. It is based extensively on SB 2044, vetoed by then-Governor Crist last summer even though it was supported by the other members of the Cabinet and Insurance Commissioner Kevin McCarty.

The House Insurance & Banking Subcommittee holds a three-hour workshop Wednesday, laying the foundation for its work later on PIP fraud and other auto insurance issues. The workshop is scheduled for 9 a.m. to noon in Room 404, House Office Building.

SB 408, Property Insurance, Including Sinkholes

You will find important background information on each issue on OnLine Sunshine, the Legislature’s Internet site. I encourage you to access information available under SB 408, from the link  below and to also download the meeting packets – January 25 for the Senate Banking & Insurance Committee and January 26 for the House Banking & Insurance Subcommittee. It is possible these meetings will be available through live streaming by the Florida Channel, but we do not know that yet. You may purchase audio  CDs of the meetings from the Legislature and we can provide you contact information on that.

As some point, probably late today, Banking & Insurance Committee staff will be posting a staff analysis of the bill and pre-filed amendments on the Senate's Internet site. These will be available from this link when they are posted: SB 408 on Senate Internet Site.

SB 408 as filed is available from this link: SB 408, Comprehensive Property Package.

The Senate Banking & Insurance Committee interim report on the sinkhole insurance crisis is available from this link:

Commissioner McCarty supports almost all of SB 408. I think he has reservations on a couple of the sinkhole provisions, but I am not sure which ones. Please see this speech last week from Commissioner McCarty where he discusses the sinkhole crisis and other cost drivers in property insurance.

PIP Fraud, Attorneys Fee Caps and Other Auto Insurance Issues

House Banking & Insurance Subcommittee staff report that the exact program for the January 26 workshop is still being developed, but it will include presentations from state Division of Insurance Fraud Director John Askins, Allen Haskins of the National Insurance Bureau and the Agency for Health Care Administration on licensing of PIP clinics.

Auto insurers have been lobbying for tougher anti-fraud laws for the last couple of years and now many are seeking broader reforms, including elimination of the Lode Star multiplier, caps on legal fees, stronger medical fee schedules and utilization review schedules. Florida’s auto insurance rates are now among the highest in the country and many point to insurance fraud and excessive attorneys fees.

DR. Bob Hartwig, Insurance Information Institute president, stated during the recent PCI conference in Orlando Florida now has the worst auto insurance fraud crisis in the country and probably the most broken auto insurance system. Insurance Commissioner Kevin McCarty and Jeff Atwater, Florida’s new Chief Financial Officer, have released major statements condemning PIP fraud in recent days and calling for legislative remedies.

“As your CFO, I have pledged to fight insurance fraud. The criminals who perpetrate these crimes are costing us billions of dollars a year in increased insurance premiums. I am committed to putting these thieves in jail,” Atwater said in the January 14 EViews, the Department of Financial Services’ weekly electronic newsletter for the press and public.

“Auto insurance fraud alone costs the average Florida family an additional $400 a year. Year after year, that adds up.

“Three of the top five cities in the country for staged auto accidents are in Florida—Tampa, Miami and Orlando. Organized fraud rings recruit willing participants, fake an accident in which no one is injured, and send the participants to medical clinics or chiropractic offices for treatments that never occur. The clinics fraudulently bill auto insurance companies the maximum $10,000 limit on the participants’ Personal Injury Protection or PIP.

“This type of fraud results in hundreds of millions of dollars in fraudulent billing, and that is money that comes directly out of our pockets. The arrests this week are the first of many in our mission to combat this costly crime.”

Insurance Commissioner McCarty identified auto insurance as another crisis facing the Florida insurance system along with property insurance. He spoke during the PCI conference.

“Traditionally, auto insurance has been one of the most competitive markets in our state. There are numerous competitors, and competition is decentralized. However, similar to homeowners’ insurance, we have noticed an increase in insurer costs that have manifested themselves into rate increase filings. In fact, in 2010 – the Office granted rate increases ranging up to 78% for bodily injury insurance, 52% for uninsured motorist insurance and 82% for PIP. It should be noted that these are outliers – these examples are at the upper end of rate increases for different large insurers, but they are quite significant nonetheless.

“The industry has cited PIP fraud as a potential cause, although this may not explain the entire problem. The Office intends to investigate further. We are in the process of organizing a voluntary data call for the private passenger auto industry to learn more about cost-drivers in this marketplace. However, even before we initiate this study, we have already performed some internal analysis to learn more about the Florida marketplace.

“Based on 2009 data, Florida’s direct loss ratio (which is losses divided by earned premium) for private passenger auto was 70.2%. This gives Florida the fourth highest loss ratio in the nation behind only Michigan, New Jersey and Kentucky. According to Insurance Service Office (ISO) Fast Track data recent loss costs for bodily injury and PIP have risen dramatically in the last couple of years, particularly for PIP. To further support this hypothesis – the National Insurance Crime Bureau has cited the Tampa area as being the state’s leader for “suspicious auto accident.” Whatever the cause, these costs are very real, and will continue to affect our marketplace if we cannot change this cost trajectory.”