Large – but not largest – auto insurers aim to cut no-fault rates
Oct 10, 2012
The following article was published in The Florida Current on October 10, 2012:
Large – but not largest – auto insurers aim to cut no-fault rates
By Gray Rohrer
Four out of the five largest automobile insurance companies in Florida are looking to cut their rates for no-fault insurance, hoping to take advantage of a new law passed this year that aims to cut fraud in the state’s personal injury protection (PIP) insurance system and hold costs down.
Progressive, Geico and USAA have filed 10-percent PIP rate reductions, and cuts to their overall auto rates (the PIP portion makes up 20 percent of the average policy). Allstate filed different PIP rates for its three separate insurance entities – Allstate Fire & Casualty (no rate change), Allstate Insurance Co. (10 percent decrease) and Allstate Property and Casualty Insurance Co. (5.8 percent decrease).
But the biggest auto insurer, State Farm, is seeking a 7.9-percent increase in PIP rates. According to data from the National Association of Insurance Commissioners, State Farm was the largest auto insurer in Florida by direct written premium in 2011, taking up 19.47 percent of the market. Together, the top five companies underwrite more than two-thirds of the auto insurance market in Florida.
State Farm believes it can justify a 22-percent increase in PIP rates, but lowered their request with the Office of Insurance Regulation because of provisions in HB 119 that cap non-emergency care at $2,500, cut out acupuncturists and masseuses and attempt to tackle fraud. PIP typically makes up about 20 percent of an overall auto insurance rate. According to a State Farm spokeswoman, the company is requesting a 2.9 percent decrease in the overall rate.
Meanwhile, five of the eight PIP rates filed by smaller auto insurance companies that have been approved by OIR are rate hikes. Under the new law, companies must file at least a 10-percent decrease in their PIP rate or explain to regulators why they didn’t.
The new law was pushed by Gov. Rick Scott and Chief Financial Officer Jeff Atwater as a way to lower auto insurance rates for consumers by reducing fraud — officials estimate scams cost consumers a billion dollars a year –, but insurance industry groups said the benefits of the law won’t be realized and passed on to consumers until some provisions of the bill, like the cap on non-emergency care, take effect Jan. 1.
Michael Carlson, executive director of Personal Insurance Federation of Florida, said larger companies can more easily shift their expenses and rate requests across different components of the total premium rate like bodily injury and uninsured motorist coverage than smaller companies can.
“There are companies who say, ‘Well this is what we think we need, but we think we can squeeze out 10 percent in the hope that the PIP savings are there,’” Carlson said. “They can sort of balance out the various coverages.”
Some insurance companies also point to a new lawsuit filed last month by a group of chiropractors, acupuncturists and masseuses challenging the new law’s constitutionality as a reason to be hesitant about drastic PIP rate cuts. But Atwater and other key lawmakers like Sen. Joe Negron, R-Stuart, are calling for more immediate PIP rate reductions, as well as the cumulative 25 percent reduction by 2014 called for in the new law.
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