From the March 19-26, 2012 issue of National Underwriter Property & Casualty • Subscribe!

Florida PIP: A Loss Tucked Inside a Win

Some say you know a negotiation was successful when neither side is completely happy with the final outcome. 

So it goes in the Sunshine State. 

The insurance industry took its lumps, as it often does, during this year’s legislative session in Florida. It battled strong lobbyists representing attorneys and physicians. But in the end, Florida insurers had a couple of trophies to hoist wearily into the sky. 

So maybe they aren’t the heavy-brass, three-tiered type of trophies. More of the plastic, “Well done!” variety. 

But that’s progress. In the past, the insurance industry has gone home after a legislative session gripping nothing more than that pitiful “Hang in There!” poster featuring a kitten dangling from a branch. 

This year, assisted in part by enthusiastic support from some heavy hitters (the state’s governor, insurance commissioner and email-sender-extraordinaire CFO), insurers who have long cried foul over Florida’s criminally mangled, no-fault, personal-injury protection (PIP) auto-insurance system finally got some reform. 

Will these changes work to reduce costs for insurers and drivers? No one is sure, but there is at least hope. 

Here is what we do know: The bill sent to the governor contains provisions meant to reduce the abuse and fraud by crooked medical providers in the system. It could also reduce costs by adjusting the payment of benefits. And the bill changes the way plaintiffs’ attorneys get paid to litigate PIP cases: They can’t use contingency-fee multipliers, and judges will be more involved in considering fees (see page 8 for full story).

Now for the part that keeps insurers from being too happy (aside from the part about losing a skirmish to cap attorneys’ fees): Somewhere along the bill’s circuitous journey through the state legislature, a very, um, interesting amendment was attached. 

By Oct. 1, auto insurers are required to submit a rate filing. The deadline is a mere two weeks after an independent consulting firm, to be contracted by the Office of Insurance Regulation, submits its findings on the bill’s expected savings.

If the insurer’s rate filing does not include a 10-percent rate reduction, it has some very detailed explaining to do. 

Insurers then get a respite until Jan. 1, 2014. That is the deadline for another rate filing. And this time if the filing does not include a 25-percent rate reduction (as of the effective date of the bill), the insurer will be back in front of regulators clarifying its perceived failure to reach the goal. 

This appears to create a very interesting dynamic only those legislative devils in Florida could devise—a relatively tight schedule of mandated rate reductions based on the bill’s expected savings, concluded by a yet-to-be-commissioned firm’s report. A loss within a win.

It’s as if the insurance industry was told, “Congratulations!” by a smiling group staring at their own outstretched, palms-up hands. 

This drama is a microcosm of why Florida fascinates us. 

Start with the geography—the way the state sticks out there and antagonizes fickle, swirling weather patterns—creating some of the worst-case scenarios in property insurance. Then add in the politics and the fact that almost all of us know someone who lives there. 

Or maybe we’re drawn to Florida as a bellwether state. Typically, what happens in Florida affects or can affect much of the rest of the country’s insurance landscape. If it can work in Florida, it can work elsewhere, right?

Or maybe it’s the fact that if the worst-case scenario is realized, pretty much all of us Americans are on the hook.

Whatever the reason, Florida’s insurance landscape is always interesting, if not entertaining. And you can keep up with all of Florida insurance news with our bi-weekly newsletter, Florida Insurance Monitor.

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