With the bill’s sponsor saying the coverage hasn’t kept up with the times, the latest effort to end Florida’s no-fault auto insurance system chugged through its first Senate committee on Tuesday, Jan. 26.
The Senate Banking and Insurance Committee backed the proposal (SB 54), which seeks to replace a requirement that motorists carry personal-injury protection coverage — key to the no-fault system — with mandatory bodily injury coverage.
But while bill sponsor Danny Burgess, R-Zephyrhills, said the overhaul is “long overdue,” concerns linger over the potential financial impacts on low-income drivers and the inclusion of a “bad faith” litigation issue that has tripped similar efforts in the past.
Under the no-fault system, drivers are required to carry personal-injury protection, or PIP, coverage to help pay medical bills after accidents. Motorists are required to carry $10,000 in PIP coverage, an amount unchanged since 1979.
“The $10,000 is a number derived from 1979 … the number has not changed since then,” Burgess said. “Fast forward to 2021, we're still at $10,000. And so, the buying value of that $10,000 in 1979, according to the U.S. Bureau of Labor Statistics, equates to about $1,252 today. So, you can see that that money really doesn't go very far.”
Lawmakers in the Senate and House have floated the idea of ending the no-fault system almost annually since trying to reform PIP in 2012. That reform effort stemmed from arguments that the system was plagued by fraud.
Burgess’ proposal would mandate that motorists carry a minimum of $25,000 in bodily injury coverage for the injury or death of one person in an accident and $50,000 for injuries or deaths of two or more people. The proposal also would retain an existing $10,000 financial responsibility requirement for property damage. Insurers would also be required to offer medical payments coverage starting at $5,000, with deductibles up to $500.
Several senators said they hope actuarial data will be available before the proposal goes to additional committees, as a staff analysis presented Tuesday didn’t include the potential economic impacts on motorists.
Sen. Jeff Brandes, R-St. Petersburg, said increasing rates on the poorest motorists could force more people to go without coverage.
“We have to address in this legislation the issue of uninsured drivers and create a stronger incentive than simply a suspended driver's license,” Brandes said. “That is what's driving rates through the roof. … Ultimately, it's the fact that you're having to pay hundreds and hundreds of dollars in premiums for uninsured motorists, because you have a one in four shot of having somebody hit you that carries zero insurance. And that is untenable and unsustainable. And that's really what's driving rates.”
A 2016 report by the Florida Office of Insurance Regulation projected that drivers would see a 5.6% savings by shifting to a bodily injury coverage requirement. A study two years later by the actuarial consulting firm Milliman showed an average increase in premiums of $67, or a 5.3% increase.
The committee approved an amendment to the bill about bad-faith lawsuits, which involve allegations that insurers have not properly looked out for the interests of their customers.
Sen. Kathleen Passidomo, R-Naples, said her amendment creates “common-sense best practice standards” for the industry when handling third-party claims.
“It also provides standards for the third-party claimant to follow when making a demand for settlement,” Passidomo said. “And it also contains obligations of the insured (customer) during the process.”
But several Democrats raised concerns the change could result in additional litigation, while saying it’s rare for a jury verdict to go against an insurance company in a bad-faith case.