Mark Roman | February 10, 2018 | Insurance Companies
For years, insurance companies in Florida have been railing about fraud and abuse in our no-fault auto insurance system. Those companies complain that health care providers are overbilling patients to grab personal injury protection benefits the no-fault law provides. They also complain about outright fraud in the system.
Maybe those companies never thought anyone would call their bluff. However, the Florida legislature is now seriously considering repealing the no-fault law and changing Florida to a fault-based auto insurance system. This would bring Florida in line with several other states (Colorado and Georgia, for example) who have abandoned their no-fault systems. In doing so, those states saved money for their auto insurance consumers.
One would think insurance companies would welcome the repeal of a system they’ve complained about for years. Alas, that’s not what is happening. Instead, now that repeal is close to reality, insurance companies are fighting it tooth and nail.
As it turns out, insurers don’t really want repeal in the first place. What they want to do is keep receiving no-faultpremiums, but greatly restrict their obligation to make no-faultpayments.
The problem is, that’s already been tried. Florida passed a thorough no-fault “reform” bill in 2012 which sharply reduced the obligation of insurance companies to pay benefits. However, that change in the law didn’t hold down costs for long. That’s one reason why so many people are now convinced that no-fault just needs to be abandoned.
To fight the gathering momentum for no-fault repeal, insurance companies recently got together and commissioned a report about what it would do. That report, by the actuarial firm Milliman, projects that repeal will actually increase auto insurance costs. Insurers will use that as ammunition to try and turn our lawmakers against changing the current law.
The report reached its gloomy conclusion by relying on some interesting methodology. The report acknowledges its conclusions are based, in large part, on survey data collected from the insurance companies affected by the repeal. It makes this startling (but commendable) admission about that data:
There may be greater uncertainty involved in our analysis as we have relied on a survey of [insurance company] members for several key assumptions.
In other words, the analytical underpinnings of the report came from the big insurers who are fighting to keep the PIP premiums flowing. That probably tells a reader all he or she needs to know.
To conclude, no-fault repeal remains a good idea for Florida. The real-world experience of states which have recently repealed their no-fault systems has been good. It’s reasonable to believe that Florida, despite some differences in its insurance market, will also benefit from a change.
In the final analysis, practical experience is entitled to more weight than an insurance company-funded study. By its own admission, that study relied too greatly on information from people with an obvious financial interest in the outcome. The old admonition to “follow the money” couldn’t apply more.