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Auto Insurance Costs Expected to Drop Due to Law Against ‘No Fault’ Fraud

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If you are a Miami resident paying auto insurance premiums, here’s some good news: your insurance costs are about to drop. The reason for lower rates? The state’s law against ‘no-fault’ fraud. As someone who lives in one of the most expensive cities for car insurance in the United States, this should be music to your ears.

The OIR Report on Auto Insurance Rate Reduction

CBS Miami recently reported that auto insurance expenses are bound to go down over a year after reforms that sought to address fraud in the ‘no-fault’ auto insurance system were carried out. According to the Office of Insurance Regulation (OIR), Personal Injury Protection (PIP) coverage is predicted to decline an average of 13.2 percent. This estimate is based on the review of 20 insurance providers that offer coverage for over 75 percent of the state’s market.

The decrease in coverage will result in an overall 1.2 percent rate drop. The insurance regulatory office noted that there will be rate reduction because ‘no-fault’ accounts make up a small portion of the coverage.

Chris Cate, a spokesman for Florida Chief Financial Officer Jeff Atwater, welcomed the report. Cate said that “PIP fraud remains a criminal activity” and implied that the ‘positive progress’ as proven by the OIR report was an indication that existing reforms must be continued to better the state’s auto insurance market.

The OIR pointed out that the expected decline was in line with projections from HB 119.

Introducing the HB 119

The HB 119 was passed by the Florida legislature in March 2012, and later signed into law by Governor Rick Scott. This law implemented a number of reforms to the state’s PIP system in order to control the rising costs of auto insurance. The escalating insurance expenses were attributed to the growing problem of ‘no-fault’ fraud.

Back in 1972, Florida adopted a PIP system wherein benefits are awarded to individuals involved in auto accidents, regardless of who was at fault. The system granted up to $10,000 in no-fault medical and death benefits as well as wage loss. However, Atwater once said that the average PIP insurance claim was actually $12,900, which was inclusive of acupuncture and massage therapy fees.

Unfortunately, the PIP system paved the way for staged accidents. Fraud raised the PIP premiums considerably, and since PIP premiums accounted for a huge percentage of the auto insurance premium, the insurance rates went up too.

To control fraud and the rising costs of insurance, changes were made to the system through the HB 119. For instance, benefits were limited to $2,500 (instead of $10,000) unless the patient had an ‘emergency medical condition.’ The patient is also required to visit an ‘initial care provider’ within 14 days of the accident. Moreover, the law allowed insurers 60 days to investigate fraud and require patients to be examined under oath before receiving benefits. Meanwhile, under the new law, acupuncturists and massage therapists were restricted from participating in PIP.

Rate Reductions of Insurers

Insurance providers did charge lower rates for auto insurance as a result of the lower ‘no-fault’ reductions. Progressive Select Insurance decreased PIP coverage by 34.6 percent, causing an overall auto coverage drop of 15 percent. Progressive American Insurance reduced PIP coverage by 34.6 percent, while their overall auto coverage went down 11.7 percent. As for State Farm Auto Insurance Co., Florida’s biggest auto insurance provider, its PIP coverage fell 1.7 percent while its overall auto coverage slipped by 3.3 percent.

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