Florida Considers Junking No-Fault Auto Insurance

May 18--State officials are cranking up a $125,000 study due Sept. 2 on the possibility of junking Florida's no-fault car insurance system after four decades.

As The Palm Beach Post reported in March, 2012 legislation was supposed to eliminate up to $1 billion in fraud and cut no-fault bills, but records show whopping premium hikes up to 40 percent by Florida's top insurers since the start of 2015.

Officials plan to choose an outside firm to work on the report by June, with a draft due Aug. 26 and a final report Sept. 2, records from the Department of Financial Services show.

Among the report's objectives: Study "the potential impact to Floridians if the personal injury protection coverage requirements were repealed and replaced with varying levels of bodily injury coverage, or if the current requirements to purchase auto insurance were completely repealed."

Florida requires drivers to buy $10,000 in Personal Injury Protection insurance. The system, which began in the 1970s, is designed to cover minor injuries regardless of who is at fault in an accident and avoid lawsuits.

But PIP produces mountains of its own lawsuits, and as many drivers see it, the costly, fraud-prone system makes them pay needlessly for medical coverage they already have from Medicare, employer plans or other health insurance.

Florida is one of a handful of states with a no-fault system and drivers pay the fourth-highest car insurance bills in the nation.

Colorado drivers saved 35 percent on their overall car insurance bills after dropping a no-fault system in 2003, The Post reported.

Colorado paid more generous no-fault benefits than Florida does, but a study found annual savings there averaged $322 per vehicle after five years -- even with a modest rise in rates for bodily injury liability insurance.

A rush on the courthouse with lawsuits and other predictions of disaster did not materialize in a way that outweighed the benefits of dropping no-fault coverage, a former skeptic concluded in 2012.

"I was pleasantly surprised it works," said Robert Ferm, who served as legislative counsel for the American Insurance Association, a trade group representing insurers in Colorado's debate. "It was not really the catastrophe that was anticipated."

The Florida study's findings this year could help legislators as they explore dumping PIP. One option is requiring bodily injury liability insurance, which most states do. More than 90 percent of Florida drivers already have it.

State Rep. Bill Hager, R-Delray Beach said, "I plan to reintroduce my legislation repealing PIP in 2017."

Given "the cycle of change of this magnitude, it may take a year or two to get through," Hager said.

Sen. Jeff Brandes, R-St. Petersburg, also sponsored legislation to repeal PIP by 2019. That bill made little headway over the winter, but Brandes said the conversation has begun and needs to continue over the summer. As he has put it: "The system is broken and rife with fraud and abuse. There is no amount of tweaking that will fix PIP. Florida can do better."

Defenders of Florida's mandate that consumers must buy PIP have included Gov. Rick Scott, hospitals and certain other health providers, and some attorneys and insurers that specialize in it.

"I think we need it" to make sure drivers have at least some coverage for injuries, said attorney Rafael Diaz in Lake Worth.

Despite reforms for which Scott personally lobbied in 2012, PIP rates have climbed 14.6 percent for the state's top 25 insurers since the start of 2015 -- even faster than the 13.8 percent rise in overall car insurance rates.

The biggest premium increases in that span include Allstate Fire and Casualty Insurance Co., which raised PIP premiums 39.8 percent and overall bills 30.7 percent, and Geico General Insurance Co. and Geico Indemnity Co., up 22.8 percent for PIP and 18.1 percent overall.

"Consumers are getting robbed," said driver Michael Dorsett, of Lake Worth.

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