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-fault
premiums, but greatly restrict their obligation to make no-fault
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
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.