Florida PIP Reform Heads to Governor’s Desk

NU Online News Service, March 12, 10:24 a.m. EST

The last day of the Florida Legislature on Friday saw the passage of a measure to help bring reform to the state’s auto-insurance system.

The insurance industry and others praised the approval of a bill to fix what the industry has called a significantly broken auto-insurance system plagued by abuse and fraud, which costs Sunshine State residents $1 billion annually.

The no-fault, personal injury protection (PIP) reform bill, HB 119, easily made it through the state House, but only narrowly passed through the Senate, 22-17.

According to the National Association of Mutual Insurance Companies (NAMIC), the bill was close to death on several occasions.

“PIP reform was a brutal, hard-fought battle in the Florida House and Senate, right down to the final day of session,” says Liz Reynolds, state affairs manager for NAMIC, in a statement. “While the final PIP legislation does not contain every measure needed to fight PIP fraud and abuse, it is still a win for companies writing auto business in Florida and especially a victory for the policyholders they represent.”

HB 119 requires claimants to seek treatment within 14 days of an accident, with initial treatment from a hospital or physician. The bill bans treatments from acupuncture and massage facilities.

The bill also limits attorneys’ fees, establishes stiff penalties for doctors who commit fraud, and requires that claimants submit to an examination under oath.

“This legislation will curb the systemic fraud and abuse committed against motorists by unscrupulous parties who will no longer be able to take advantage of the current system,” says Ray Farmer, region vice president for the American Insurance Association, in a statement.

The final measure also establishes rate-reduction benchmarks to ensure insurers pass expected savings to consumers.

Gov. Rick Scott, Insurance Commissioner Kevin McCarty and Chief Financial Officer Jeff Atwater pushed hard for reform, holding press conferences and demonstrations of how staged auto accidents are done.

However, McCarty has said he was not impressed with the Senate’s version of the bill because it would not result in the kind of fraud prevention and consumer protections needed. The Office of Insurance Regulation is evaluating the final language of the bill, says a statement. The OIR’s input will likely influence the decision by Scott to sign the bill into law.

Nevertheless, the OIR says it commends lawmakers for getting the bill passed, a signal that they “recognize it is critical that we change incentives in the system to reduce PIP fraud.”

McCarty has called the current auto insurance system a “pot of gold for unscrupulous providers and fly-by-night clinics.”

The industry says it also saw positive news in the passage of a bill to limit the ability of the state’s last-resort insurer to levy assessments. However, reforms to the Florida Hurricane Catastrophe Fund (FHCF) were not passed.

The FHCF, a state-run provider of reinsurance, should have been more of a priority, says think tank The Heartland Institute.

“The state has enjoyed a remarkable string of luck, with six successive seasons without a hurricane strike, but that could end at any time,” says R.J. Lehman, deputy director at Heartland. “The Cat Fund is dangerously overexposed and undercapitalized, and the claims it would face in the wake of a major storm could threaten to bankrupt insurance companies, leave consumers without the claims paid, and devastate the state’s economy.”

A report last year by independent-financial advisor Raymond James says the FHCF will not be able to raise enough money in the capital markets via post-event bonds to cover all of its claims-paying obligations. The fund potentially faces a $3.2 billion shortfall if a large storm hits.

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