Life Without PIP…Worth the Risk!

Sitting on the board of the Florida Automobile Joint Underwriting Association (FAJUA) is like being in the sky-box for one of the most abused insurance systems in America; Personal Injury Protection (PIP). As both fraud and premiums have soared so, too, has the FAJUA’s policy count; rocketing from a low of “six” private passenger vehicles to nearly 800  4-wheel “defined” vehicles under Florida’s no-fault (PIP) statute…in less than a year!

Going from six two-seater motorcycles (that’s right,”motorcycles”), to nearly 800 vehicles with lot’s of room for injured passengers was confirmed as a red flag at the last board meeting.  The FAJUA is becoming a target of accident fakers. Fifty six fraudulent claims came from the clients of only three agencies.

Some private carriers have left the state, others have pulled away from Hillsborough and surrounding counties. Statewide, Florida drivers are paying $549 million more annually, just for  fraud.  And, it’s getting worse!  If lawmakers continue to do too little, too late, this fraud tax will pierce $1billion near term; then it’s on to Jupiter and Mars.

Despite galloping premiums insurer’s still pay out 40% more than they take in. Meanwhile, the poor, the unemployed, immigrants many of them, desperate all of them; are being exploited, their lives endangered, while the thieves…clinic operators, massage therapists, lawyers, even licensed medical professionals and  doctors, get filthy rich!

One fraud investigator called it a gigantic racketeering enterprise with elaborate multi-level staged accident schemes, run by managers with goals and quotas, using multiple fake clinics,  training for injured passengers, identity theft, bribery and more. It’s so bad in Hillsborough County that the first thing police do when called to an accident is investigate to see if it was accidental.

Numbers don’t lie.

  • Even as the frequency of accidents declined between 2004 and 2009, the cost of PIP claims  surged from $1.43 billion in 2008 to $2.37 billion last year.
  • Florida leads the country in staged accident cases.
  • Florida’s average medical claims are 66% higher than the national average ($12,000 per year to $8,000 per year, respectively).
  • Florida has a significantly higher number of procedures per PIP claim than the national average – 100 procedures versus the national average of 60 procedures.
  • The number of massages prescribed as a PIP related injury treatment has increased by 251% in the last 5 years.
  • Since 2009 Florida’s top five auto writers were granted the following PIP rate increases: State Farm Mutual, 49.7%; GEICO, 72.2%; Progressive American, 63.0%; Progressive Select,   48.5%; Allstate, 35.1%.

(Source: Florida Department of Insurance, August 16, 2011 presentation before the Florida Cabinet.)

So…why doesn’t somebody do something?  Well, frankly…they’ve tried.

Even though a senate study showed prices, overall, would likely decline and losses for insurer’s would go down, lawmakers reenacted PIP in 2007 after it was scheduled to sunset during the 2003 session.

Last year’s reforms couldn’t even get to the floor for a vote and are now part of an Issue Brief (2012-203) by the Senate Banking & Insurance Committee. Following a frightening 2000 grand jury report which revealed massive systemic abuse  lawmakers implemented reforms in 2002 and 2003 and, when that proved insufficient, again in 2007.

The problem?

PIP reform draws an angry crowd: doctors, lawyers, hospitals, Chiropractors, big and small business, and insurer’s.  Trial lawyers actually lobby for a “first party” payment system designed to exclude them.  Hospitals lobby to keep  PIP. Health insurer’s like Blue Cross/Blue Shield want to keep PIP.  Meanwhile, the players with greatest potential impact, auto insurers, can’t agree on the basic choice between reform and repeal.

So…what’s a lawmaker, otherwise consumed by redistricting issues, to do?

One scintilla of consensus appears to be that many in the industry, and government, while not promoting repeal, are at least accepting of it; even more so than 2003.  Chief Financial Officer, Jeff Atwater, said “…fix it or flush it.” Kevin McCarty said… “The question I think is — is it a time for us to just abandon that system, and I think that we’re probably very close to that determination.” Robin Westcott, the Insurance Consumer Advocate (ICA) who formed a PIP working group also indicated repeal of PIP was an option and that the only question is what, if anything, to put in its place.

The American Insurance Association (AIA) is working on an answer to Westcott’s question, noting that some 87% of Floridian’s already carry Bodily Injury liability coverage. AIA’s statement shows that PIP is so dysfunctional, and the likelihood of necessary reform so remote, that repeal is the most viable solution.

Having labored long and hard to pass PIP, and it’s subsequent reforms, it pains me to say…”I agree.”

Legislators should repeal PIP this year and mandate the purchase of bodily injury liability coverage, as is required in 36 of 38 tort states–states, which by comparison to Florida, are doing just fine. Any debate on whether a first party payment system is still needed could be offset by including mandatory purchase (or offer) of $10,000 in medical payments coverage.

Either way…life without PIP is now imminently worth the risk.

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