This year’s No-Fault reform bill (HB-119) contained a $200,000 allocation to study its impact on PIP premiums going forward.  Media reports, I’m afraid, will leave consumers thinking their auto premiums will soon go down by 25%.

In the just released OIR study, (conducted by Pinnacle Actuarial Resources, Inc.) it was concluded the reduction in PIP losses will be between 16.3% to 28.7% resulting in an indicated statewide average savings in PIP premiums of somewhere between 14.0% and 24.6%.

The difference between losses and savings is due to carrier overhead expenses not being commensurately impacted by the reforms.  In short; a 16.3% cost savings equates to 14.0% premium savings.

Also likely to be overlooked is the fact that any reduction in PIP benefits will result in a smaller, but lock-step increase, in Bodily Injury (BI) and Uninsured/Underinsured Motorists (UM/UIM) costs. Pinnacle’s best estimate is an increase between 3% to 5%.

Likely to be lost in the media shuffle is OIR’s careful attempt to lower expectations and misinterpretations of the reports findings with the following caveats:

  1. The savings is on the premium indications – not the actual premiums
  2. The indicated savings is only on the PIP portion of the premium, which is roughly 20% of the average auto insurance bill
  3. The indicated savings may actually mitigate premium increases, not reduce premiums
  4. The indicated savings will not be realized until January 1, 2013 – at the earliest
  5. Insurers do not have to accept the indicated savings calculated by Pinnacle

Carriers are required to reduce rates by at least 10 percent by Oct. 1 or prove why they can’t. A second filing, where rates are expected to drop even more, is Jan. 1, 2014; after the law is fully in effect.

Technically Pinnacle’s report wasn’t due until Sept. 15, but…it was released early by OIR so the findings would be available to companies prior to the Oct. 1 filing deadline.

If you would like to read and/or print the entire 83-page report you can do so by clicking here.

If you’d like to read my previous posts on PIP and the legislative reform effort click here.

For other studies on PIP and Florida’s No-fault law contained on this site, click here.

Finally, the following links provide all you’ll want to know about what the media and other parties think about the conclusions of the OIR study:


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