New laws designed to reduce loss cost volatility and claims fraud in the Florida no-fault auto insurance system (commonly referred to as personal injury protection [PIP]) would be a credit positive for property/casualty insurers, according to Fitch Ratings. Florida has generated the fifth worst direct underwriting results of all U.S. states in private passenger automobile insurance over the five-year period 2008-2012.
Full effect of the new laws will not be felt until the middle of 2014 when PIP prices are required to decrease by 25% and initial implementation will have some seasoning. Still, some industry participants have reported seeing a reduction in the cost of some claims.
The legislation was designed to target the abuse in Florida PIP, which has been estimated as high as $1 billion a year. Major changes in response to this law include requirements that: accident victims must begin receiving treatment within 14 days of injury; available benefit payments of $10,000 per claimant are only available for medical emergencies and are $2,500 otherwise; and that acupuncture and massage therapy are no longer considered payable sources of treatment. The law also increased penalties for fraud and set limits on attorney fees.
Florida is the third largest state for private passenger auto insurance based on direct written premiums. The largest five writers in Florida account for over 60% of the market and include National Indemnity Company (Fitch Insurer Financial Strength Rating [IFS] of 'AA+') with a 17% market share, State Farm Mutual Insurance (not rated) with 16%, Progressive Insurance Group (IFS of 'AA') with 13%, Allstate Insurance Group (IFS of 'A+') with 11%, and United Services Automobile Association (IFS of 'AAA') with 5%.
Recently, Rep. Carlos Trujillo filed two measures (HB 267 and HB 269) making bodily injury coverage a replacement for no-fault auto insurance. Fitch will continue to monitor developments related to the Florida PIP market to determine what impact, if any, it could have on ratings.
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