NU Online News Service, April 12, 3:05 p.m. EDT
The results of a Florida personal injury protection (PIP) insurer data call confirms statements made by the industry in recent years: despite no increase in new drivers and no increase in the frequency of crashes, PIP claims increased 28 percent from 2006 to 2010.
The Florida Office of Insurance Regulation (OIR) conducted the data call in which 31 companies participated, the OIR says. The information provided by the companies, supplemented by data gathered from other agencies, appears to support industry assertions regarding the increase in PIP claims due in large part to fraud.
According to the OIR's report, payments on PIP claims have increased 66 percent from 2006 to 2010, as insurers paid $8.7 billion during that time.
In an attempt to get hold of the fraud aspect of the system, the OIR says it examined how soon a claim is filed on a new policy. In 2010 about 14.4 percent of claims were filed within 30 days of a new policy being written, which is up from 8.6 percent in 2006.
The frequency and severity of claims are each up since the fourth quarter of 2008. The OIR says that, at the same rate, the industry can expect to see a 19 percent increase in frequency and a 9 percent increase in severity next year.
Unprofitable Loss Ratios
Loss ratios based on direct incurred losses versus direct earned premiums were barely above profitable levels at 97.4, meaning that for every dollar collected 97 cents is used to pay losses.
But the ratios get worse when other expenses—like those for the defense of lawsuits, appraisers, private investigators and other representatives—are factored in. Inserting these costs into the equation, insurers spend $1.04 to pay losses for every dollar collected in premium.
PIP-related lawsuits against insurers increased 387 percent from 2006 to 2010. The number of settled claims increased 315 percent during the same time.
Massages
Gathered information points to a recent uptick in the numbers of physical medicine and rehabilitation procedures billed to insurers after accidents.
Almost 25 percent of amounts paid by insurers were for massages. The number of units (the number of times a procedure was performed) for massages jumped 251 percent from 2007 to 2010, as the total paid by insurers after application of the fee schedule tripled during the same period.
Overall, the frequency of procedures has risen 22 percent since 2006 and the number of times a particular procedure was performed rose 36 percent.
For Consumers
To cover the rise in frequency and severity, the OIR says consumers can expect a 29 percent increase in premium in the next year.
Though changes in territory vary, conditions in the market prompted insurers to file for 10 percent average statewide rate increases for PIP coverage over the last couple of years, says the OIR.
A large portion of claims and payments are generated from South Florida. In 2010 payments of PIP claims in this area totaled more than $1 billion—more than central, southwest, northeast and the Tampa-St. Peterburg areas combined.
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