Editors Note

When ten representatives of insurance companies and trade organizations took their seats at a table before the House Insurance Committee to discuss the future of the state's no-fault personal injury protection law, it offered a rare public glimpse into just how deeply the issue has caused a schism between insurers. For the most part, the industry takes pride in publicly presenting a consensus position, or at least keeping their various differences from public view. In the case of PIP, however, those differences cannot be glossed over, namely because of the stark choices involved. With PIP scheduled to sunset in 2007, unless reenacted by the legislature, lawmakers have forced carriers to take a stand. And as a result, what has emerged is an industry-wide debate that, arguably, reflects as much on lawmakers as on carriers.

The industry split over PIP revolves around three basic positions, including those companies and trade organizations that favor outright repeal of the system, those that favor maintaining the current law with some reforms, and those that favor repeal unless lawmakers enact “meaningful reforms.” Taken at face value, those three positions seem highly divergent. However, they really involve two very familiar issues, including the use of medical fee schedules and litigation reform. Fix those two problems and you have the definition of “meaningful reforms,” and the current differences within the industry would largely evaporate. The problem is that the industry has little leverage when it comes to convincing lawmakers to institute those reforms.

The first problem for the industry when it comes to PIP is that it is a crisis without victims. Gerald Wester, lobbyist for the American Insurance Association, is right when he says, “There is not a crisis at this point, the market is competitive, and insurance is available.” Without the tailwind of consumers' complaints, the industry is robbed of its most tried and true method of lobbying for reforms. Therefore, the industry is left looking for new strategies to convince lawmakers to adopt its agenda.

One argument being tested is the time-honored approach of blaming the trial bar. William Stander, lobbyist for the Property and Casualty Insurance Association, took this tact when he told the committee that, due to litigation, the current no-fault system is already a tort system. A second approach is to compare PIP to other lines of insurance, such as workers' comp. Workers' comp has all the features carriers want in PIP, including medical and legal fee schedules. The problem is that workers' comp is not without its weaknesses and it would be an uphill battle to convince lawmakers to import workers' comp law into PIP just for the sake of doing so.

Carriers' other traditional trump card is the threat of leaving the market unless reforms are made. But given how lucrative the auto insurance market has become, none of the gang of ten even came close to voicing this argument. This leaves the industry with few arguments, which is why the majority of the ten representatives are supporting reforms. However, along with AIA, other carriers, such as State Farm, are going to support the repeal of PIP, while publicly taking the position that they have no confidence in the legislature's willingness to implement comprehensive reforms. It's a bold move to dare lawmakers to enact reforms or come off seeming weak. So begins the PIP debate, and only time will tell which arguments will prevail.